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ENERGY CONSUMPTION
OF THE U.K.

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TABLE OF CONTENTS

INTRODUCTION .......................................................................................................1 ENERGY..............................................................................................................2

1. ENERGY PRODUCTION AND RESOURCES OF THE U.K..............................2
PRIMARY ENERGY PRODUCTION. ............................................................................2
DEPLETION OF OIL RESOURCES.............................................................................4
GAS PRODUCTION AND RESERVES. ........................................................................5
COAL PRODUCTION AND RESERVES. ......................................................................5
CAPACITY OF RENEWABLE AND NUCLEAR ENERGY SOURCES.................................6

2. ENERGY PRICES...............................................................................................8
3. INTERNATIONAL COMPARISONS OF ENERGY PRODUCTION AND USE..9

4. GOVERNMENT ENERGY POLICY..................................................................12 SECURITY............................................................................................................13 DIVERSITY...........................................................................................................14 SUSTAINABILITY ..................................................................................................15

D EPLETION OF NATURAL RESOURCES .............................................................16
EFFICIENT USE OF ENERGY.............................................................................16
ENVIRONMENT...............................................................................................17
ECONOMY .....................................................................................................18
SOCIAL..........................................................................................................19
COMPETITIVE PRICES ..........................................................................................19

5. ENERGY IN THE ECONOMY; INVESTMENT AND PRODUCTIVITY. ...........20 OUTPUT AND CONTRIBUTION TO THE BALANCE OF PAYMENTS. ..............................20 INVESTMENT IN THE ENERGY INDUSTRIES. ............................................................22 THE OIL AND GAS EXTRACTION INDUSTRY............................................................23 THE ELECTRICITY INDUSTRY.................................................................................24 THE DOWNSTREAM GAS INDUSTRY......................................................................25 THE COAL INDUSTRY. ..........................................................................................27 THE NUCLEAR INDUSTRIES. .................................................................................28

6. ENERGY AND THE ENVIRONMENT. .............................................................30 CLIMATE CHANGE ...............................................................................................30 UNITED KINGDOM: ENVIRONMENTAL ISSUES ........................................................31

A IR POLLUTION ..............................................................................................31
ENERGY USE AND CARBON EMISSIONS...........................................................32
ENERGY AND CARBON INTENSITY...................................................................34
PER CAPITA ENERGY CONSUMPTION..............................................................35
RENEWABLE ENERGY.....................................................................................35
UNITED KINGDOM ENTERING THE 21ST CENTURY ...........................................36

ENERGY CONSUMPTION ...............................................................................37

7. ENERGY CONSUMPTION INDICATORS AND STATISTICAL VIEW. .............37 ENERGY RATIO....................................................................................................37 ENERGY CONSUMPTION BY SECTOR......................................................................38 INDUSTRIAL ENERGY CONSUMPTION AND OUTPUT .................................................38 TRANSPORT ENERGY CONSUMPTION.....................................................................39 DOMESTIC ENERGY CONSUMPTION.......................................................................40 SERVICE SECTOR ENERGY CONSUMPTION.............................................................42

8. MAIN TRENDS IN ENERGY CONSUMPTION...................................................43 9. CONVERSION EFFICIENCIES: THE IMPACT OF INCREASING ACTIVITY, EFFICIENCY AND STRUCTURAL CHANGE IN THE ECONOMY. ......................45

10. FINAL ENERGY CONSUMPTION....................................................................49 TOTAL DEMAND BY SECTOR ........................................................................49 TOTAL DEMAND BY FUEL ..............................................................................50 TOTAL DEMAND BY END USE........................................................................51

DOMESTIC SECTOR ..................................................................................52
INDUSTRY ..................................................................................................55
SERVICE SECTOR .....................................................................................56
TRANSPORT...............................................................................................57

11. ANALYSIS OF THE FACTORS DRIVING CHANGES. ...................................59 ENERGY INTENSITY........................................................................................60 INDUSTRY ..................................................................................................61 DOMESTIC SECTOR ..................................................................................62 SERVICE SECTOR DEMAND.....................................................................65 TRANSPORT DEMAND ..............................................................................67 ENERGY EFFICIENCY ...............................................................................69 THE GOVERNMENT’S APPROACH................................................................71 A SUSTAINABLE ENERGY POLICY...........................................................71 CLIMATE CHANGE .....................................................................................72

CONCLUSIONS AND RECOMMENDATIONS ......................................................73 CONCLUSIONS ................................................................................................73 DEPLETION OF RESOURCES............................................................................73 CONSUMPTION GROWTH.................................................................................74 FUTURE DEVELOPMENT..................................................................................76 WHY SUPPORT RENEWABLES?........................................................................79 RECOMMENDATIONS .....................................................................................82

REFERENCES ........................................................................................................84

Introduction

Energy plays a vital role in our modern society, underpinning the quality of life we enjoy. Whether in the domestic sector, industry and commerce or transport, its constant and uninterrupted availability is something we often take for granted. For vulnerable consumers, this security can be a lifeline. In recent years, energy production and consumption has played an ever-increasing role. In the past decade or so, it has become increasingly obvious that the production and use of energy has significant environmental implications. This has led to a range of agreements in various international forums aimed at limiting further damage to the environment. It will be a major challenge to achieve a balance between the need, on the one hand, for economic growth and, on the other, the need to reduce the impact of energyrelated emissions on the environment, since historically economic growth has marched hand in hand with increased energy consumption. Ensuring secure, diverse and sustainable supplies of energy at competitive prices remains a key policy objective of the United Kingdom Government.

The increasing importance of energy in modern life and the global growth of energy consumption was the reason that appealed to me to examine in deep the energy consumption of UK. In this project module I investigate principally the energy system of UK, including energy production and resources of the UK and the energy use indicators, energy market and prices. I look at the international energy production and use and UK government energy policy and the role of energy in the economy. The present major report examines specifically energy consumption of the UK in different aspects and the relation between energy consumption and the environment. It provides the latest figures on energy production, energy use, foreign trade and prices of fuels and discusses the main trends in energy consumption of UK and of the world, conversion efficiencies and final energy consumption by sector.

Environmental objectives are becoming increasingly important. Climate change, arising from man-made emissions to the atmosphere -mostly from energy use - must be addressed. The acceleration in energy use around the world has led the International Energy Agency to forecast an increase in world energy demand of two-thirds by 2020. The task for governments is to match the need to protect the environment with the demand for economic growth, which is close related with rising energy consumption. Analysing factors driving changes I tried to answer the question about the future consumption of UK and integrated activities what must focuss on creating and applying new solutions which achieve balanced improvements to Britain’s energy, environmental and economic performance and thereby contribute towards a sustainable future for UK’s citizens.

ENERGY 1. ENERGY PRODUCTION AND RESOURCES OF THE U.K.

Primary energy production.

Energy sources can be considered as primary or secondary. Primary fuels either occur naturally, as in the case of crude oil, natural gas or coal, or are derived by directly harnessing naturally occurring energy, as with nuclear or hydro electricity. UK is using fossil fuels in the form of coal, oil and natural gas, plus nuclear and renewable power as primary sources of energy. Secondary fuels, such as petroleum products, coke and secondary electricity, are obtained either from primary fuels or from other secondary fuels, by conversion processes.

UK is fortunate in possessing a range of different primary fuels, such as oil and natural gas. It is self sufficient in energy – unlike most of its competitors, dominates the foreign fuel trade, by crude oil and petroleum. It is also by far the most less dependent member state of the European Union on imports.
Energy production and total consumption can be expressed in terms of the energy content of the primary fuels. A common unit of energy, the tonne of oil equivalent, is used to enable data on different fuels to be combined and aggregated.

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Chart 1.1
UK energy flows, 2002(1)(4) (Million tonnes of oil equivalent)
Source: Office for National Statistics

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Chart 1.2
UK production of primary fuels, 1970 to 1998 Source: Office for National Statistics

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Chart 1.3
Primary energy supply by fuel, 1998 Source: Office for National Statistics

The flow of energy from primary production, through the conversion industries and to final users is shown in Chart 1.1.In this very simplified flow chart stock changes and minor flows such as exports of coal and gas and the non-energy use of gas, are not shown. It can be seen from the flow chart that final energy demand is met by a combination of primary and secondary fuels. The chart also illustrates the relative magnitude of the energy losses occurring during the production of these secondary fuels, particularly during electricity generation.

The UK is fortunate in possessing a range of different primary fuels. Chart 1.2 shows trends in the production of these fuels and illustrates the rapid increase in the production of North Sea oil and natural gas in the 1970s. Chart 1.3 shows the contribution of these fuels to primary energy supplies in 1998.Supplies are met from domestic production and from imports. Unlike most of its competitors the UK is self-sufficient in energy. Chart 1.4 shows the UK’s primary energy production and consumption, and illustrates the degree to which the country was dependent on energy imports prior to North Sea oil and gas becoming available. In the early 1970s energy imports accounted for over 50 per cent of the UK’s consumption, but in 1983 the UK was a net exporter, at a level equivalent to 18 per cent of inland consumption. After 1983, net exports declined slowly, and, following temporary production losses in the North Sea since 1988, the UK was a net importer of energy until 1993.The balance switched again in 1994 as production on the UK continental shelf started to recover. Since then production has continued to rise.

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Chart 1.4
UK primary energy production
and consumption, 1970 to 1998
Source: Office for National Statistics

Depletion of Oil Resources.

To the west of the Western Isles, Orkney and Shetland, where the shallow waters of the UK geological Continental Shelf meet the deeper waters of the North Atlantic, lies the region known as the Atlantic Margin. The rock beneath the seabed holds large amounts of crude oil and gas, trapped many miles beneath the bottom of the ocean between geological layers millions of years old. Oil companies have explored this area for more than 20 years. So far they have found reservoirs that contain up to 1.5 billion barrels of crude oil that could be extracted. These reserves would be the equivalent of 5% of all UK oil discoveries to date.

Remaining reserves of oil have been broadly unchanged since the mid-1980s despite large increases in production.

Revisions to estimates of reserves in 1998 are due to limited new discoveries and by the impact of low oil prices during the year affecting the economic viability of some previous discoveries, and affecting company activities.

Oil production as a proportion of reserves has increased steadily since 1992, and in 1998 reached a high for the period, partly due to downward revisions to the estimates for reserves, but also due to increased production.

About 7.5% of the UK's proven, probable and possible oil reserves were consumed in 1998. The ratio of extraction has been increasing steadily since 1980 and in 1988 it exceeded the previous high level of 6.8 per cent in 1985. Since 1980, estimates of remaining proven, probable and possible oil reserves fluctuated around 2 billion tonnes level, despite production totalling 2.0 billion tonnes over the period.

However, these ratios should not be taken as a measure of the future life of these reserves; additional reserves continue to be discovered and it is therefore likely that production of oil will continue at current levels for longer than suggested by these depletion rates.
Typically, the estimates of remaining reserves in present discoveries have stayed at broadly the same level over the last 10 years, despite the large increase in oil and gas extracted. This is due to new discoveries being made and new technology allowing exploitation of discoveries that were previously regarded as not viable.

Gas Production and reserves.

 

Remaining gas reserves have increased slightly since the late 1980s despite large increases in production.

For gas, the depletion rate of 5.3 per cent seen in 1998 does not allow for additional discoveries or for the exploitation of coal bed methane. Since 1980, estimates of remaining proven, probable and possible gas reserves have been revised each year so that at the end of 1998 they are still 0.2 trillion cubic meters higher than at the end of 1980. This is the net result of increased discoveries amounting to 1.2 trillion cubic meters being offset by production of 1.0 trillion cubic meters of gas over the period.

As with oil, estimates of reserves of gas were revised downwards at the end of 1998, and this was the main reason for the increase seen in the depletion rate in the year (from 4.6 per cent in 1997) rather than any large increase in the level of production. This downwards revision to reserves followed from the close link that exists between the level of oil and gas prices affecting the economics of the production process, as well as increasingly gas being produced in association with oil production. As such, any decrease in the estimate of oil reserves has a direct impact on the estimates of gas reserves.

Gas production as a proportion of reserves has more than doubled since 1984. About 5.5%of the UK's proven, probable and possible gas reserves were consumed in 1998. The increase is mostly due to the downward revisions to the estimates for reserves, with only a slight increase in the level of production in the year.

However, these ratios should not be taken as a measure of the future life of these reserves; additional reserves continue to be discovered and it is therefore likely that production of gas will continue at current levels for longer than suggested by these depletion rates.

Coal Production and reserves.

 

There were estimated to be approximately 200 million tonnes of economically viable coal reserves at existing mines at the end of March 1999.

 

Coal production declined during the 1980s, largely in response to falling demand caused by switching away from UK coal to more economic fuels.

In the 1990s UK produced coal has met with competition for electricity generation from gas and from cheaper imported coal. Whilst production fell rapidly in the early 1990s, (by nearly 40%between 1992 and 1995) its decline has slowed in recent years (to 20% between 1995 and 1998).

Between 1989 and 1995, coal production in the United Kingdom fell by half, while natural gas production increased 74 percent. Britain's move away from coal-fired electric power towards natural gas power is the result of rapidly changing prospects for both of these UK industries. The closure of uneconomic coal mines in the United Kingdom coincides with increasingly available natural gas supplies that have come on stream in the North Sea.

Privatization of electricity in the United Kingdom had an important impact upon fuel use in electricity generation. Coal had long been the predominant fuel in electricity generation and the electricity industry had long been the primary purchaser of British coal. However, between the 1980's and the mid 1990's, developments in the electricity, coal, and natural gas industries, along with changes in the political environment, created an environment that favored the use of natural gas (rather than coal) to become the preferred fuel of choice in UK electricity generation.

Environmental considerations also worked against UK coal in recent years. In

Environmental considerations also worked against UK coal in recent years. In percent reduction in total sulfur dioxide emissions by 2003, compared to 1980 emissions levels.

Since that time international prices have fallen slightly, and the coal quality specifications of UK consumers are set to tighten. Production levels will be affected by changes in demand caused by factors such as environmental limits on sulfur dioxide (SO2) emissions, by competition from gas and imported coal in the electricity generation sector, by planning constraints on opencast developments and by exhaustion of current deep-mined capacity.

Capacity of Renewable and Nuclear Energy Sources.

Renewable sources of energy are those which are continuously and sustainably available in our environment such as energy from the sun, energy from water, energy from wind, energy from wood and crops, energy from waste and other renewables such as: waves, tides, heat from inside the earth.

Renewable sources accounted for 3%of all electricity generating capacity in the UK in 1998. Hydro electricity schemes provide two-thirds of the total capacity from renewables.
Renewable sources of energy make an important contribution to secure, sustainable and diverse energy supplies and are an essential element of a cost-effective climate change programme.

The Government is working towards a target of renewable energy providing 10 per cent of UK electricity supplies as soon as possible. It hopes to achieve this by 2010. Whilst this is an ambitious target it is not an end in itself. Rather the programme outlined in this document (and on which we would welcome your views) aims to give new and renewable technologies a push in the right direction. The Government expects renewables not only to generate power, but also to provide heat and transport for our homes, industry and commerce in centuries to come.

Renewables are not only important in generating jobs and developing future industries, they will also play a crucial role in enabling the UK to meet our environmental targets of reducing greenhouse gases by 12.5 per cent by 2008–2012 and our goal of reducing emissions of carbon dioxide by 20 per cent by 2010. UK’s Government is committed to putting the environment at the heart of decision making. As the Kenyan proverb says, “The earth was not given to us by our parents; it was loaned to us by our children”. We all have a responsibility to ensure that the way we live today does not adversely affect the inheritance we leave for generations to come1.

The capacity for electricity generation from renewable sources other than hydro is five and a half times its level in 1990. However, renewables contributed only 1 % to the UK's primary energy supply in 1998.

The United Kingdom was one of the first countries to employ nuclear power in electricity generation. The first nuclear power plant, the Calder Hall unit, was connected to the national electricity grid in 1956. In 1995, nuclear power accounted for 26 percent of all electricity generated in the United Kingdom.

The UK's nuclear plant capacity in 1998 was nearly four times greater than at the end of 1970. Nuclear electricity contributed about 10% to the UK's primary energy consumption and accounted for 28 % of electricity supplied in 1998.

Because electricity produced from nuclear sources generates none of the greenhouse gases associated with burning fossil fuels, nuclear power makes a substantial contribution to limiting such emissions. For example, if the electricity currently generated in the UK were to be generated using fossil fuels, there would be an increase in carbon emissions each year of between 11 and 22 million tonnes, depending on the mix of fossil fuels used as replacements. Put another way, nuclear electricity generation currently reduces national carbon emissions by between 7 and 14 per cent.

1 New & Renewable Energy Prospects for the 21st Century, John Battle Minister for Energy and Industry

2. ENERGY PRICES.

A range of factors can influence price movements, including the degree of competition and the amount of liberalization within a market; the relative costs of primary fuels; and general movements in world
energy prices. Final prices can vary a
lot according to consumption - a large
industrial consumer will pay considera
bly less per unit than small user.

The introduction of competition, along
with other factors such as plentiful fuel
supplies, in industrial energy supply
markets has contribute to lower prices.
A similar trend has been evident in the
domestic gas market where in 1998
new competitors were offering reduc
tions of over 20 per cent off existing
British Gas prices. The opening up of

00006.jpgFuel price indices

 

(1)

 

Chart 2.1
for the industrial sector, 1970 to 1998 Source: Office for National Statistics

 

the domestic electricity market to full competition in 1999 appears to be having a

 

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Chart 2.2
Petrol and diesel prices(1) , 1980 to 1999 Source: Office for National Statistics

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Chart 2.3
Fuel price indices(1) for the domestic sector, 1970 to 1998 Source: Office for National Statistics

similar effect on electricity prices. However, competition itself does not guarantee lower prices an indeed competition may be base on other factors such as quality of service. Prices paid by final consumers are influence by several factors including: international prices of key raw materials such as crude oil the balance of supply an demand taxes an the costs of extracting, manufacturing (i.e. refining or generation), distribution, retailing an marketing individual fuels.

The indicators presented here show trends in UK prices for both industrial and domestic consumers.

The importance of energy prices will vary between consumers, depending on what proportion energy costs are of their total costs: for example, an energy- intensive industry, such as metals manufacture or cement, will be very aware of price levels and of keeping control over its energy use. Similarly, for domestic consumers, energy use can account for 10 per cent or more of the expenditure of lower income households, but perhaps 3 per cent or less for the highest earners. More details on energy prices, including international comparisons will be given in the individual fuel chapters on the main report. The above data summarizes the latest main trends.

Annual average industrial prices for electricity and coal in 1998, in real terms, were at their lowest level since records began in 1970.Gas prices were lower only in 1996 and 1997.

Between 1990 and 1998 real industrial prices have fallen by 36% for coal; 43% for gas; 24% for electricity and 23%for heavy fuel oil. Annual average 4 star petrol prices have risen in real terms by around 22½% including duty and taxes between 1990 and 1998 and fallen by 44% excluding duty and taxes.

Since Q1 1989 the price of 4 star petrol has gone from slightly over 1 pence/litre more than unleaded to over 7 pence/litre more in Q2 1999.Over the same period DERV prices have changed from 2 pence/litre cheaper to around 3 pence/litre more expensive.

Between 1990 and 1998 annual average domestic prices in real terms including VAT fell by 16 ½% for gas, 15% for electricity and 4 ½% for coal and 37 ½% for heating oils.
Between 1996 and 1998 domestic electricity prices fell by 14 per cent in real terms with gas falling by 9 ½%. The reduction in VAT to 5% in September 1997 was a factor behind the reductions as were cuts in the Fossil Fuel Levy for electricity and the growth of competition for gas.

Industrial gas prices in the UK were the lowest in the EU in 1998 and the second lowest among G7 countries. This represents an improvement from 6th lowest in the EU in 1990, but no change on 1997. Prices in Japan are significantly higher that in the other EU a G7 countries due to their reliance on imported liquefied natural gas. Overall real prices have fallen in most countries in the period 1990 to 1998, the main exceptions are Italy and Finland where tax increases have le to significant price rises.

3. INTERNATIONAL COMPARISONS OF ENERGY PRODUCTION AND USE.

This topic search was particularly selected, to broaden the view of general trends in production and use, by comparing the international energy policy. Among the set of indicators compared are the following:

Self sufficiency in Energy
Diversity of primary energy supply
Fossil fuel dependency
The energy ratio
Ratio of final energy consumption to primary energy consumption Household energy use per person

Important data on energy self-sufficiency is presented below.

 

The UK was one of only five OECD countries, which produced more energy than it consumed in 1997.

Norway’s position is exceptional in producing more than 9 times as much energy as it consumes.

Amongst the G7 countries the UK, Canada and France have seen marked improvements in this ratio since 1970. In the UK increases in oil and gas production have more than offset the decline in coal production; in Canada the production of all fuels has increased; in France the rise in nuclear electricity is the over-riding factor.

Unlike, the United States and Germany, the U.K. is less dependent on imports of oil and gas than it was in 1970.

With the decline in the importance of coal and the increase in natural gas and nuclear electricity the UK now has a more diverse primary energy supply than many OECD countries.

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Chart 3.1
Ratio of energy production to primary energy
consumption in OECD countries, 1997
Source: International Energy Agency

All G7 countries have seen increases in the diversity of their energy supplies since 1970.In France the increasing dominance of nuclear power has resulted in a reversal of this trend in recent years.

The proportion of primary energy supply met by coal, oil and gas gives a measure of a country’s dependence on fossil fuels. The OECD countries that are least dependent of fossil fuels, such France, Sweden, Norway and Iceland, have well developed sources of nuclear or hydro electricity, or geothermal heat. Most G7 countries have reduced their dependence on fossil fuels since 1970 by developing these alternative sources. In France, the growth of nuclear electricity has led to a sharp decline in fossil fuel dependency. In contrast Italy, which has no nuclear electricity, has seen no change in its fossil fuel dependency. In the UK the growth of nuclear electricity has reduced our dependence on fossil fuels from 96% of primary energy supply in 1970 to 87%in 1997.

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Chart 3.2
Ratio of energy production to primary energy consumption, 1990 to 1997
Source: International Energy Agency.

The energy ratio is the ratio of overall primary energy consumption to GDP at constant prices. Differences between countries reflect many factors including climatic differences, the dependence on energy intensive industries, the relative importance of transport, and the efficiency in the use of energy in all sectors of the economy. All G7 countries have seen improvements in the energy ratio since 1970 with growth in GDP outstripping that of primary energy consumption. The largest reductions have been seen in the countries with the highest energy ratio at the start of the period.

Differences between countries in this ratio reflect differences in the relative importance of primary and secondary fuels (particularly electricity). They also reflect differences in overall conversion efficiencies, due in part to the different mixes of fuels used to generate electricity. The UK has seen a slight improvement in this ratio since 1970;a steady increase in the proportion of final consumption accounted for by electricity has been more than offset by improvements in conversion efficiency. Most G7 countries have experienced a decline in the ratio since 1970.

The OECD countries vary considerably in the amount of energy each person uses at home. This variation is a combination of many factors, such as climate, house size, household size, comfort levels, energy efficiency and energy prices.

Amongst the G7 group, those countries with the lowest levels in 1970 have seen increases in energy use per person, most noticeably Japan and France, as average comfort levels have risen. In contrast the USA and Canada have seen declines in average energy use as energy efficiency measures have taken effect. In the UK there has been a relatively modest rise since 1970.

4. GOVERNMENT ENERGY POLICY.

Modern life centers around change -in technology, social attitudes, social and industrial structures. The energy sector in the UK is already unrecognizable from a decade ago, and it is still evolving. The driving forces of competition and innovation underpin the Government’s central energy policy objective to ensure secure, diverse and sustainable supplies of energy at competitive prices. This objective takes in the Government’s concern for the environment, health and safety and a fair deal for all consumers, as well as its commitment to all aspects of sustainable development.

Competitive markets and companies are the key to achieving this objective, but the Government has a contribution to make in setting the right frameworks and in dealing with issues which the market on its own may be less well equipped to handle.

The Government has three main roles. These are to:

• set the framework: this means providing the appropriate legal framework for competitive energy markets and the economic development of Britain’s energy resources consistent with safety and environmental protection;

• provide for regulation in the consumer interest: the Government sets up the regulatory frameworks to put consumers first. Regulators supervise both the transition to competition and any remaining monopoly activities such as electricity and gas distribution systems, and set minimum standards for consumers, particularly disadvantaged consumers. The Government has brought forward proposals for modernizing the framework of utility regulation, in particular to give primary importance to protecting the interests of consumers, wherever possible through competition;

• monitor the wider public interest: The Government has a responsibility to ensure that energy plays a proper role in sustainable development, for instance by ensuring that renewable energy sources, combined heat and power (CHP) and cost effective energy efficiency measures continue to be developed and that environmental considerations are taken into account.

It also has to ensure that the frameworks it establishes do not prejudice energy security and diversity, as discussed below.

Consumers benefit most from open and competitive markets, which have already delivered lower prices and better service levels from utilities, and which promise continuing advances in technology, service, and efficiency of operation. Liberalization and competition have brought about significant restructuring, and we can see the beginnings of an industry supplying energy, rather than one fuel or another. These changes contribute to the Government’s wider social and environmental objectives too.

Gas and electricity liberalization is also transforming the European energy market. The UK has taken the lead in opening markets and promoting competition working with the European Commission and other Member States to push liberalization forward.

Environmental objectives are becoming increasingly important. Climate change, arising from man-made emissions to the atmosphere -mostly from energy use must be addressed. The acceleration in energy use around the world has led the International Energy Agency to forecast an increase in world energy demand of two-thirds by 2020. The task for the government is to match the need to protect the environment with the demand for economic growth, which historically has gone hand in hand with rising energy consumption.

The government’s intention is to establish a regulatory framework which is stable over the long term, which ensures lower prices and high quality services for consumers, which promotes competition in the market place and which can then adapt to that competition by modifying the level of regulation as appropriate.

This Chapter provides an analytical discussion of the government's policies. A set of major key indicators gives a broad view of general trends in some areas of energy policy and explains the main objectives of Government’s policies what are aimed to ensure secure, diverse and sustainable supplies of energy at competitive prices.

Security

The continuation of energy supply is important because a modern society is crucially dependent on the availability of energy in sufficient quantities. The UK is well endowed with natural energy resources, and has been self sufficient in energy use in almost every year since 1981, except for a short period after the Piper Alpha accident in 1988.The oil and gas production and petroleum products sectors account for the majority of our exports from the energy industries.

The importance of energy security –and particularly electricity -is well established, with costs to industry, commerce, and the domestic user if there is a failure to supply. A measure of security for one particular aspect of electricity supply (the efficiency of the distribution system) is the number of interruptions and minutes lost per customer. The number of interruptions and minutes lost should ideally be declining year on year. Figures for 1997/98 were similar to 1996/97, as a result of the severe winter storms over Christmas 1997 and New Year 1998,but the number of interruptions and minutes lost per customer in 1998/9 were less than in 1997/8. In the early 1970s energy imports accounted for over 50 per cent of UK primary energy consumption.

The UK became a net exporter of energy in 1981 with the rise in the production of oil and gas.

Following the Piper Alpha accident oil production fell and the UK became a net importer of energy between 1989 and 1992. The UK is now a net exporter again, and has been in each of the last six years.

OFGEM monitor the distribution system performance of each public electricity supplier (PES). During 1998/99 the average customer suffered 0.8 interruptions and each of these interruptions lasted approximately 80 minutes.

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Chart 4.1.
Trade and consumption, 1970 to 1998
Source: Office for National Statistics

The number of interruptions per 100 customers and the minutes lost per customer in 1998/9 were lower than 1997/8 levels by 8 per cent and 11 per cent respectively.

 

The number of minutes lost and number of interruptions depends heavily on the weather and other disturbances to electricity cables.

 

Diversity

Diversity in fuels used, the sources of those fuels, and their means of delivery all contribute to security of supply and to stability in the broad cost of energy (because alternatives are available).The UK has access to a range of fuels, most of them available indigenously. Diversity is about flexibility of response in adapting to unforeseen circumstances, the ability to innovate, and our ability to respond to an uncertain future.

The concept of diversity is complex and difficult to define precisely, beyond emphasizing the need to be able to react to an uncertain future. It has been suggested that a suitable definition would be to consider variety, balance, and disparity. Under variety, the number of options available would need to be considered, which would include different technologies as well as fuel sources for electricity generation. Balance takes into account how much the mix relies on any one of the available options, while disparity looks for any qualitative difference between them. Diversity is not just about individual fuels, but it is also about technology, fuel sources, routes, means of delivery, market structures, etc. It is difficult to construct an indicator that encompasses all these factors, so this stage simply looks at shares of fuels and how this has varied over time. This provides some indication of diversity; but it is not the whole story, and a number of other factors need to be taken into account.

Diversity carries benefits for individual consumers and for the national economy, by reducing the impact of a supply disruption for any particular fuel. This is particularly true if alternative fuels can be used, including alternatives to fossil fuels: for example, oil was used (when coal supplies were restricted) in 1984 in place of coal for generating electricity.

The measure of diversity for primary energy supply used in these indicators (Shannon - Weiner) is based on six groups of fuels. The measure of diversity in the electricity generation sector is also based on six fuels.

The mix of primary fuels consumed for energy purposes in the UK has generally become increasingly diverse since 1960.

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Chart 4.2
Diversity of fuel supply
Source: Office for National Statistics

In 1984 the miners ’strike led to a fall in the coal consumed and a drop in the diversity of supply as oil’s share of supply rose.

Between 1988 and 1990 the share of gas dropped to below 25 per cent, resulting in a slightly lower measure of diversity. There was a slight increase in diversity in the early 1990s as nuclear electricity use increased, but this trend has been reversed in the last five years as the share of coal has fallen and the share of gas has risen. Diversity in fuel input for electricity generation increased through the late 1960s and early 1970s, as petroleum increased its share, peaking at 29 per cent in 1972,at the expense of coal. This trend was reversed in the late 1970s.

In 1984, diversity in the supply of fuels for electricity generation increased due to the coal miners strike. Coal, which had been the main source of fuel for electricity generation, was used less and oil was used more.

Sustainability

A sustainable supply of energy is one that supplies our needs for now and that is maintained for the future, taking into account existing and potential sources of energy. It considers how energy use can be sustained at the levels required for economic and social function and growth without excessive or irreversible environmental impact.

The role of renewables has become increasingly important as an alternative source of fuel in electricity generation as a ‘cleaner ’way of generating electricity. Although it would not be realistic, on the basis of our current knowledge, to expect them to replace the major contribution to diversity and security made by fossil fuels, they do provide a different kind of diversity, by providing a way to generate electricity with few or no carbon dioxide (CO2 )emissions. The Government intends to work towards the aim of achieving 10 per cent of the UK`s electricity supply from renewables by 2010.By 2003, 5 per cent of electricity should be provided by renewables compared to the current figure of 2 per cent.

Depletion of natural resources

One aspect of sustainability is the state of existing sources of energy and the question of how quickly they are being used. About 7 per cent of the UK’s proven, probable and possible oil reserves and 5 per cent of the UK ’s proven, probable, and possible gas reserves were consumed in 1998.However,this should not necessarily be taken as a measure of the future life of these reserves; additional reserves continue to be discovered, though the rate of production of gas is set to rise in the period up to 2002,so reducing the reserves to production ratio. Estimates of undiscovered reserves of oil and gas are made which increase as new structures or improved technologies are identified or developed. However, such reserves are neither geologically nor economically assured, and some risk is attached to their availability.

It is important that the UK makes the most of the reserves available in the North Sea. The first field brought into production on the UK Continental Shelf was in June 1975. Cumulative production to the end of 1998 was 2,306 million tones of oil and 1,312 billion cubic meters of gas. The total remaining reserves are estimated to lie in the range of 1,050-4,680 million tones of oil and 1,230-3,620 billion cubic meters of gas. The UK is likely to become a net importer of gas at some point in the first decade of the next century.

Efficient use of energy

Improved energy efficiency at all stages of the energy cycle, from production to final use, reduces the amount of fuels required inputs for all kinds of processes and uses. Benefits can include lower energy costs to individuals, improved national competitiveness and enhanced energy security. There are also environmental benefits, and environmental targets will be easier to meet.

Energy efficiency can be looked at in two stages: (a) efficiency in energy production and (b) final use efficiency. The electricity generation sector is the main energy producing sector with the potential to improve efficiency in the creation of energy, while final use efficiency can be considered on a sectoral basis. For example, energy can be used more efficiently in the domestic sector through the use of insulation or double glazing, and the development of energy efficient products, such as energy efficient light bulbs.

Although electricity supply to final users has been increasing since 1970, fuel input has been steady due to improved efficiency in electricity generation.

On a sectoral basis, efficiency of fuel use can be analyzed by linking energy use to a measure of activity -for example, domestic energy use per household, industrial and service sector energy use per unit of output, and transport energy use linked to distance travelled.

However, trends are often complicated by factors such as improved comfort levels or faster travel, which will result in more energy being used. Thus a flat trend does not necessarily reflect a lack of energy efficiency gains, but may simply mean that these gains are being offset by greater comfort or performance.

Environment

The energy sector has a significant impact on the environment in many different ways at all stages of energy development, production, final use, and disposal of any waste products. The results are reflected in the impact of these various processes on greenhouse gas emissions and other air pollutants.

Greenhouse gas emissions are currently increasing as a result of human activities. Naturally occurring greenhouse gases maintain the earth’s surface at a temperature 33 °C higher than it would be otherwise, such that life is possible. Increased levels of greenhouse gases in the atmosphere risk causing enhanced global warming and subsequent climate change. The most important anthropogenic greenhouse gas is CO2 and in 1997, just over 92 per cent of carbon dioxide emissions came directly from fossil fuel combustion. The UK has a commitment under the UN Framework Convention on Climate Change to return greenhouse gas emissions to their 1990 level by the year 2000.A protocol to the Convention was agreed at Kyoto in December 1997 which will commit the EU (including the UK) to an 8 per cent reduction in emissions of a basket of 6 greenhouse gases, including CO2 ,relative to the 1990 level over the period 2008-2012. The UK contribution is a 12 ½per cent reduction relative to the 1990 level over the period 2008-2012.

Air pollution can have a wide range of environmental impacts, potentially affecting soil, water, wildlife, crops, forests and buildings as well as damaging human health. Sulphur dioxide (SO2 ) is one of the main air pollutants associated with fossil fuel combustion. Two thirds of sulphur dioxide is generated by the combustion of coal. The UK has set limits on the maximum amount of SO2 emissions that can be emitted from Large Combustion Plants.

The second Sulphur Protocol to the UNECE Convention on Long Range Transboundary Air Pollution committed the UK to reduce sulphur dioxide emission levels by 80 per cent compared to 1980 levels by 2010.The target of annual emissions from the electricity supply industry in England and Wales is 365 kilotonnes of SO2 by 2005.Reductions in SO2 emissions have resulted from the installation of Flue Gas Desulphurisation (FGD)equipment at National Power ’s Drax power station and PowerGen ’s Ratcliffe power station and the reduction in the use of coal in electricity generation. Under ideal circumstances, FGD can remove 90-95 per cent of the sulphur dioxide from flue gases.

As the economy grows and new machinery and technology is developed, emissions are a good indicator of

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Chart 4.3.
Indices of industrial electricity and gas prices Source: Office for National Statistics

whether the growth is sustainable in
environmental terms. This can be done
by considering greenhouse gas
emissions in relation to GDP. If growth of
emissions is either in line with or
increasing at a faster rate than GDP,
then this would indicate that the growth
is not sustainable on an environmental
level. In fact, emissions of CO2 and SO2
have been decreasing whereas GDP
has been increasing over the last 28
years.

Economy

 

00014.jpg

The energy industries are vital to the health of the UK economy. Apart from the economy’s fundamental need for energy, the industries themselves contribute 4 per cent to Gross Domestic Product. Labor productivity, measured as output per employee, in the energy industries is over six times the level for industry as a whole, and investment per head is over seven times the average for industry as a whole. Apart from the direct contribution to economic growth by the energy industries themselves, the provision of energy contributes indirectly to the output of industry and services more generally.

Chart 4.4.
Fuel expenditure as a percentage of total expenditure by income group

Social

One way of measuring the social impact of energy consumption is by considering fuel poverty and looking at trends in the percentage of expenditure spent on fuel. All customers should benefit from the use of energy, and if people cannot afford the energy they need, there is clear potential for social (e.g. health), as well as economic, problems. If a household spends more than 10 per cent of its total expenditure on fuel, it is defined as being in fuel poverty. Three main causes of fuel poverty have been identified -low income, energy inefficient housing and living in a larger property than is needed. All three factors interact to make solutions difficult to implement. It is currently estimated that (including housing benefit in income levels)there were about 4 ½million households in England alone in fuel poverty in 1996.This represents a fall of about 1.5 million compared to 1991.There are several reasons for this fall including the following:

general improvements in the UK economic situation;
general conditions of housing have improved;

energy prices have fallen, (the price of gas fell by 8 ½per cent and electricity by 5 per cent between 1991 and 1996).

 

Competitive Prices

Lower energy prices benefit consumers through lower bills. For industry, this improves competitiveness by bringing down costs; for individuals, it improves their standard of living. In a competitive energy market, larger customers can negotiate lower prices, as energy can be used for continuous processes and loads can be managed to run at certain times of the day or night. The domestic sector is increasingly able to obtain lower prices through the advent of competition, although to a lesser extent, as energy demand may be more variable through the day and year, depending on the weather, the number of people living in a particular house, and the type of dwelling. One way of assessing the competitiveness of energy prices is by looking at annual UK pre-tax energy prices; if they remain below the EU/G7 median, then the competitive position of the UK is better than half or more of the countries in the EU/G7. There can be considerable differences between prices in different countries. If energy prices are particularly high in one country, such as Japan, then this can distort the mean average value, rendering comparisons difficult. Hence the median is seen as a better indicator to use for comparisons of this type. Annual average industrial prices for electricity in 1998, in real terms, were at their lowest level since records began in 1970, with gas prices lower than all years prior to 1996. Between 1990 and 1998 real industrial prices have fallen by 43 per cent for gas and 24 per cent for electricity.

5. ENERGY IN THE ECONOMY; INVESTMENT AND PRODUCTIVITY.

The energy industries are vital to the health of the UK economy. In addition to its role in supplying energy to households, energy is an essential input into any type of business. It is no surprise that 2 of the largest 3 businesses in the UK, Shell and BP are active in this sector. I’ve examined the latest figures, concerning the energy industry evolvement in economy and more specific the below topics:

Output and contribution to the balance of payments.
Investment in the energy industries.
The Oil and Gas Extraction industry.
The electricity Industry.
The Downstream Gas Industry.
The Coal Industry.
The Nuclear Industries.

This section highlights the part played by the energy industries in the UK economy. It compares the energy industries with the rest of UK industry using statistical data.

 

Output and contribution to the balance of Payments.

In 1998 the energy industries share of GDP was 4.5 per cent at current factor cost. The share has remained between 4 and 5 per cent since 1991.The oil and gas extraction industry has increased its share of GDP in each of the last 7 years, increasing from a modern low of 1.5 per cent in 1991 due to production cutbacks following the Piper Alpha incident, to an estimated 1.9 per cent in 1998. Despite this recent growth, the energy industries total share of GDP is considerably lower than in the early 1980s when it was around 10 per cent. The fall came mostly as a result of the dramatic drop in oil prices in 1986, when the price of crude oil roughly halved.

In current price terms, the value added by the energy industries has increased in each year since 1988, rising at an annual average rate of 4.4 per cent, although price effects can account for some of this growth. The comparable figure for all industry is 4.8 per cent, and for the whole economy, 7.0 per cent. Energy sectors which, again in current prices, have grown considerably over the same period are electricity generation and supply and oil and gas extraction, with average annual rates of growth of 10.2 per cent and 4.1 per cent respectively.

Other sectors of the energy industry have not performed so well, notably the coal extraction industry, which, despite some increases, has fallen by an average of 6 per cent each year since 1970. By 1998 the level of value added was only half the level seen in 1990, and one third of that in 1980. The value added by the refining sector has also dropped from 1990 levels, with a fall of 40 per cent from 1990 to 1991, a slight fall between 1991 and 1992 and modest increases since then.

The energy industries currently contribute about 3%to GDP (at current factor cost). This is less than half the peak levels of around 10% achieved during the early 1980s, before the drop in the price of oil in 1986.

00015.jpg

Chart 5.1
Contribution to GDP and total employment in the energy industries, 1980 to 1998
Source: Office for National Statistics

00016.jpgChart 5.2
Value of exports and imports of fuels as a percentage of the value of all visible exports and imports(1) , 1970 to 1998 Source: Office for National Statistics

Employment in the energy industries fell at an average rate of 8%per year between
1980 and 1996; much of the decline was in the coal industry. Between 1996 and
1998, employment in the energy industries stabilized, rising in 1997 before falling back again in 1998.

Oil and oil products account for most of the overseas trade by the energy industries. Before the world oil price crash in 1986 exports of fuels accounted for over 20%of all UK visible exports.

Energy currently represents 4%of exports and 2% of imports.

Net exports of energy contributed £2.8 billion to the Balance of Payments in 1998.In the period from 1981 onwards (when the UK became a net exporter) the cumulative contribution has been £52 billion.

Investment in the Energy Industries.

In 1997 about a third of all industrial investment was made by the energy industries. The offshore energy industry accounted for 17% of the UK's total industrial investment in 1998.

In the early 1990s this proportion had risen to over 50%, with increases in investment by oil and gas extraction, electricity generation and by the supply sectors, mainly as a result of the construction of Sizewell B and the growth of gas-use for electricity generation.

Investment per head by the energy industries is currently over 7 times higher than in the production industries.

 

00017.jpg

Chart 5.3
Investment by the energy industries, 1980 to 1998 Source: Office for National Statistics

00018.jpg

Chart 5.4
Research and Development in the energy industries Source: Office for National Statistics

Research and Development is defined as ‘creative work undertaken on a systematic basis in order to increase the stock of knowledge and the use of this stock to devise new applications. Chart 5.4 illustrates how R&D carried out within energy companies in the UK has been changing over the period 1993 to 1997, regardless of the source of funding.

In 1997, energy industries in the UK invested nearly £95 million in Research and Development. Of this 68% came from the electricity and gas industries, 26% came from coke ovens, oil refining and nuclear fuel production. The rest came from the coal extraction and oil and gas extraction sectors.

The Oil and Gas Extraction industry.

In 1998, total demand for petroleum products fell marginally, by ½ per cent, reflecting primarily the continued substitution of petroleum products by other more efficient and environmentally-friendly energy forms, most notably natural gas. Around 85 per cent of petroleum products are for energy uses, and most of this energy use (70 per cent of all petroleum products) is in the transport sector.

Other sectors which consume petroleum products for energy use are the domestic sector, electricity generation, and industrial users. Consumption within these sectors has been in decline in recent years. Non-energy use accounts for the balance of 15 per cent of total petroleum product consumption. Oil production in 1998 increased by 3½%, reaching a record level of 133 million tonnes, higher than in any year since oil was first produced from the North Sea in 1975. 15 new fields started producing during the year. Gas production in 1998 was 4½% higher than in 1997, again a record level, with 6 new offshore gas fields starting production in 1998.

00019.jpg

Chart 5.5
Inland use of petroleum products, 1998
Source: Office for National Statistics

Demand for the main petroleum products is illustrated in Chart 5.5. Petrol is the most important fuel to the UK refining industry, accounting for the largest proportion of consumption (30 per cent of total energy consumption in 1998). However, demand for motor spirit has followed a downward trend since 1990. In contrast, diesel has experienced stronger demand growth over the same period. During 1998 there was a substantial increase in consumption of aviation fuel, by some 10 per cent. Fuel oil demand has reduced by 70 per cent since 1990, due to the move towards gas being the fuel of first choice for use in electricity generation and by industry. Demand for gas oil has also decreased, by 10 per cent since 1990, due to decreased demand for use by railways and industry and for heating purposes. At the time of writing this Report, there are 10 principal refineries and 3 smaller refining units in the UK. However, Shell has announced its intention to close the Shell Haven refinery by the end of 1999.At the end of 1998, Shell Haven represented around 5 per cent of UK crude distillation capacity, and its closure is therefore unlikely to have a significant impact on the UK refining industry.

UK refiners face a continued problem of over capacity in North West Europe. Utilization rates remain high at 95 per cent, but hydro skimming margins were low in the first 6 months of 1999,with gross refining margins in Europe significantly lower than in 1997 or 1998.UK refineries, like their European counterparts, have suffered from a combination of high product inventories, which have kept product prices down, and rising crude oil prices.

Total crude distillation capacity in the UK at the end of 1998 was 92 million tonnes, an increase of 1.2 million tonnes, or 1 per cent, over 1997.Virtually all of this increase (1.1 million tonnes) was accounted for by increased capacity at the Conoco refinery at Killingholme in Humberside; but the 1998 figure is still lower than the 1996 figure of 93.5 million tonnes because of the closure in late1997 of Gulf Oil’s refinery in Milford Haven.

As already mentioned, demand for gas oil and fuel oil has been weak. Petrol demand is holding up, with strong demand from the USA -although, as with other products, high stock levels in the first half of 1999 put downward pressure on petrol prices. The second half of 1999 could see a rise in margins, with tightening of supply as refiners switch to 2000 specifications and product prices increase as a result. In the medium to long term, rationalization is likely to continue in Europe in an attempt to reduce costs and increase margins.

Key indicators for the industry

In 1984, the oil and gas extraction industry alone contributed 7%to GDP. After the drop in the price of oil in 1986, this reduced to under 3%,and in 1998 was under 2%. In 1998, at constant prices, investment by the oil and gas industry was 33%lower than the record level of 1992. Even so, oil and gas still accounted for 19%of all industrial investment, compared with 28%in 1992. Labor productivity increased in each year between 1990 and 1996, at an average annual rate of 17%. Productivity fell between 1996 and 1997 by 22%, and increased by 10%between 1997 and 1998.

The electricity Industry.

Coal was the principal source of fuel for electricity generation until the present decade, but its market share is now declining rapidly. Since 1990, output from nuclear stations has increased and there has been extremely rapid growth in the use of combined cycle gas turbines. As a result, coal, nuclear and gas each now account for around 30% of electricity supply.
The mix of fuels used to generate electricity has changed markedly in recent years. While the largest share of electricity supplied was still taken by coal in 1998, the proportion has fallen from two thirds to one third in eight years. 1998 saw a slowing in the rate of increase of gas' share and a fall in the share of imports enabling both coal and nuclear to hold their shares of electricity output at the same proportion as in 1997.

Projecting this trend forward is difficult, since the future use of gas depends on commercial decisions in the market, in particular how many of the new gas stations being proposed are actually built. However, DTI’s consultants consider that on current trends, gas’s share of electricity generation will continue to rise, to at least 50% and possibly up to 60% or more by 2003. Coal could account for as little as 10% of electricity generation by that date. This would mean a significant loss of diversity.

Key indicators for the industry

The electricity industry currently contributes about 1 ¾%to GDP. This contribution has changed little in recent years, but is slightly under the record contribution seen in 1982, of 2.1%.

In 1998, at constant prices, investment by the electricity industry was 20%lower than the record level of 1992. The electricity industry accounted for 11%of all industrial investment in 1997. Labor productivity has increased in almost every year since 1980 due to falls in employment while output increased. Productivity decreased by 6%between 1997 and 1998.

The Downstream Gas Industry

Oil and gas production reached record annual levels for both oil and gas in 1998,with oil production at 132.6 million tonnes -2.1 per cent above the previous record level set in 1995;and record gas production for the ninth successive year at 95.6 billion cubic meters. Chart 5.6 shows oil and gas production since 1970.

Remaining discovered recoverable reserves (proven, probable, plus possible) at the end of 1998 were 1,800 million tonnes of oil and 1,795 billion cubic meters of gas (compared with 2,015 million tonnes of oil and 1,895 billion cubic meters of gas at the end of 1997). Recent trends are illustrated in Chart 5.7.

00020.jpg

Chart 5.6
Trends in the production of UKCS oil and gas, 1970 to 1998

Source: Department of Trade and Industry

A record number of 204 offshore fields were in production as at March 1999 -109 oil fields,79 gas, and 16 condensate: as well as 26 onshore oil fields and 9 onshore gas fields; Government revenues from oil and gas production for the financial year 1998/99 were estimated at £2.6 billion, compared with £3.3 billion in 1997/98.

The number of development wells begun offshore in 1998 increased from the 1997 figure of 257 to a new high of 281, including 89 sidetracks. A total of 80 exploration and appraisal wells were begun offshore in 1998, including 21 sidetracks. Of these 80 wells, 47 were exploration wells, compared with the 61 such wells drilled in 1997.Seven significant discoveries (i.e. wells that tested or would have tested at a flow rate of over 1,000 barrels of oil or 15 million cubic feet of gas a day) were announced, including one in the Southern North Sea made in September and brought into production before the end of the year.

One of these discoveries was on acreage awarded in the first licensing Round (1964).

00021.jpg

Chart 5.7
Discovered UK oil, cumulative production plus estimates of remaining reserves
in present discoveries, 1980 to 1998

Source: Department of Trade and Industry

Onshore there was a continuing high level of development activity, with 21 wells drilled (albeit a reduction on the 26 wells drilled in 1997).Five exploration wells were drilled, with three discoveries (one from a well which commenced in 1997).Nine appraisal wells were drilled, compared with only two in 1997.

The provisional drilling figures for the first half of 1999 indicate a low level of activity in this period, which may reflect the way company budgets were drawn up at the end of 1998 when the oil price (at around $10/barrel)was extremely low. The wells that have been drilled have yielded a number of discoveries.

It has been recognized by the oil and gas supplies industry that the UKCS is a maturing province, and that success in exporting is therefore key to its continued prosperity. Some 83 per cent of UKCS suppliers are actively involved in exporting, recognizing the importance of the international opportunities available in this sector. UK suppliers are estimated currently to have around a 4 per cent share of a global market estimated at around $200 billion in 1999.

Key indicators for the industry

The downstream gas industry currently contributes 0.4%to GDP. This contribution has declined since 1982, when it was around 0.9%. In 1998, at constant prices, investment by the gas industry was 50%lower than the record level of 1992. Labor productivity increased throughout the 1980s and into the 1990s as employment fell and output increased. Productivity has grown rapidly in the last few years. Output per head has nearly doubled since privatization in 1986.

The Coal Industry.

UK coal demand continued the steady gradual fall seen since privatization of the coal industry in 1994.Power station demand for coal (which accounts for around 75 per cent of the total) is declining, due principally to the continuation of new gasfired capacity and to the improved performance of nuclear stations.

Whereas coal accounted for about 65 per cent of electricity supplied in the UK in 1990,its market share in 1998 had fallen to 33 per cent. Demand for coking coal is relatively constant at 8.5-9.0 million tonnes a year. Coal demand in both the industrial and domestic sectors is n a quite steeply falling trend, although household demand fluctuates from year to year in response to variations in winter temperatures.

Trends in coal consumption by the main sectors are illustrated in Chart 5.8 and a

 

00022.jpg

Chart 5.8
Trends in coal production, 1970 to 1998
Source: Department of Trade and Industry

detailed breakdown of coal supply and
consumption in the UK is given in Chart
5.9

The demand is met from three main

 

sources.

UK deep-mined coal production, though
currently falling at a rate of around 15-20
per cent a year, still accounts for 40 per
cent of coal supply.

UK open cast accounts for around 25 per
cent. Imports account for around a third
(net of relatively small export volumes).
Import penetration reflects considerations

00023.jpg

of both quality and price.
UK, for example, produces virtually no coking coal; and in the steam coal sector, both the sulphur and chlorine contents of most UK deep-mined coal are significantly higher than those available on the international market. At the same time prices of international coal have fallen significantly over the last three years.

Chart 5.9
Trends in coal consumption, 1970 to 1998 Source: Department of Trade and Industry

In 1998, power station rose against the trend from 47.0 million tonnes in 1997 to 48.3 million tonnes because of a temporary sharp reduction in electricity imports from France, and a higher level of maintenance outages at nuclear stations and some newer Combined Cycle Gas Turbine (CCGT)stations.

However, the long-term decline resumed in 1999:power station consumption was 18 per cent lower in the first half of 1999 compared to 1998.The increase in power station demand was marked by an equivalent increase in steam coal imports, which rose from 10.8 million tonnes in 1997 to 12.1 million tonnes in 1998. UK deepmined and opencast production in 1998 were 25.0 million tonnes and 15.0 million tonnes respectively, a reduction of 17 and 10 per cent respectively on 1997 levels.

Key indicators for the industry

The coal industry currently contributes a little over 0.1%to GDP. This contribution has fallen considerably throughout the 1980s and 1990s, as the market for coal has shrunk as coal consumers, in particular power generators, have found alternative fuels. Investment in the coal industry has fallen considerably since 1980, reflecting the smaller number of pits now operating and reduced development of these pits. Labor productivity increased since 1984, and this increase accelerated during the early 1990s. Between 1990 and 1996, productivity grew rapidly, with the closure of many uneconomic units. The last two years has seen an average 7%fall in productivity.

The Nuclear Industries.

Nuclear electricity generation accounted for about 28 per cent of electricity generated in the UK in 1998.This output is provided by two companies, British Energy plc and BNFL/Magnox.British Energy, the larger of the two, is a holding company with two subsidiaries -Nuclear Electric Ltd operating the PWR and five AGR stations in England and Wales; and Scottish Nuclear Ltd which operates two AGR Stations in Scotland. BNFL/Magnox owns and operated 8 magnox stations in England and Wales.

The nuclear fuel cycle can be divided into four main stages:

the front-end: the mining and extraction, and export of uranium ore. Once in the UK, the uranium is then converted by a process of purification, enrichment, and finally fabrication into a dense fuel sealed in metal-clad fuel elements; fuel use in the reactor: fuel is transferred to the reactor site, where it is stored until it is used in the reactor. Nuclear fission in fuel consumes uranium and creates heat, which is used to raise steam for electricity generation. A nuclear fuel rod will remain in a reactor for a period of approximately four years, after which time it is removed and replaced with fresh fuel;

the back-end: after being left to cool in cooling ponds at the reactor site, spent fuel from UK nuclear power stations is transported to Sellafield for further cooling and then reprocessing, which involves the separation, through a number of chemical processes, of the re-usable materials in the spent fuel -uranium (96 per cent of the material)and plutonium (1 per cent)-from the waste products (the remaining 3 per cent). The separated uranium and plutonium are then available for re-use in the manufacture of fresh fuel, and the waste is conditioned into a chemically stable form suitable for long term storage;

Decommissioning of a nuclear power station is the process whereby it is shut down at the end of its economic life, eventually dismantled, waste stored or sent for disposal and the site made available for other purposes.

The United Kingdom has long experience of nuclear power as a means of commercial electricity generation, in what is now a mature industry.UK organization and companies have had to face the challenges of reprocessing fuel, managing waste and decommissioning redundant facilities. The UK is thus increasingly recognized as a world leader in the management of nuclear liabilities. The UK industry’s exports were worth about £650 million in 1998, principally from BNFL ’s overseas reprocessing and fuel services contracts. The nuclear industry makes a major positive contribution to the balance of payments.

The UK nuclear industry provides direct employment for a highly skilled workforce of about 30,000 throughout the country, which in turn directly generates work for about another 30,000 people. The nuclear industry is an important sector both in the UK’s manufacturing and in its science and technological bases: its annual turnover is approximately £4.7 billion and it contributed an estimated £3.3 billion (or 0.46 per cent)] to national GDP in 1998.

Key indicators for the industry

The nuclear industries currently contribute a little over 0.1%to GDP. Investment in the nuclear industries increased by 77%between 1996 and 1998 despite falls during the early 1990s.However, the level of investment in the nuclear industries is still about half the record level seen in 1987. Labor productivity increased by 3%in 1998, but has fallen 35%since its peak in 1986.Since then output per head has decreased by nearly a third.

6. ENERGY AND THE ENVIRONMENT.

In the past decade or so, it has become increasingly obvious that the production and use of energy has significant environmental implications. This has led to a range of agreements in various international forums aimed at limiting further damage to the environment. It will be a major challenge to achieve a balance between the need, on the one hand, for economic growth -particularly in developing countries -and, on the other, the need to reduce the impact of energy-related emissions on the environment, since historically economic growth has marched hand in hand with increased energy consumption.

I’ve looked principally at the agreements and proposals in relation to energy-related pollution, which have a regional or global impact [Climate change – Air quality]. I also covered nuclear safety issues in Eastern Europe. The following information relates to Kyoto Protocol.

Climate Change

Developed countries now have legally binding targets to reduce greenhouse gas emissions following their agreement in 1997 on the Kyoto Protocol to the United Nations Framework Convention to Climate Change (UNFCCC). They have targets covering a basket of six greenhouse gases -carbon dioxide, methane, nitrous oxide, hydro fluorocarbons, per fluorocarbons, and sulphur hexafluoride. Overall, developed countries have agreed to reduce emissions of these six gases to 5.2 per cent below 1990 levels in the period 2008-2012.

The European Union agreed a target reduction of 8 per cent under the Kyoto Protocol. This was shared out amongst member states, with the UK taking on a target reduction of 12.5 per cent. Member states have, on several occasions, expressed support for action at Community level to supplement their national strategies to meet their Kyoto commitments under the EU burden-sharing arrangement. A package of common and coordinated policies and measures is being developed, which has the aim of factoring climate change into a wide-range of policy areas including transport, industry, household energy saving, agriculture, forestry, structural funds and research and development.

At the mid-Summer 1998 meeting of the European Council at Cardiff, the Energy, Transport and Agriculture Councils were invited to establish strategies for giving effect to environmental integration and sustainable development. The European Commission outlined a possible strategy in energy, which focused on the development of an internal market in renewables and energy efficiency. This formed the basis of a report to the Vienna Council in 11th-12th December 1998 which recognized the important role of Member States in defining national policies and the Commission’s role in the co-ordination of policies and measures in the Community. The Vienna Council has since called for all Councils to provide comprehensive strategies by the end of 1999 and work on this has continued under the German and Finnish Presidencies.

The UK Government is preparing to publish a draft national climate change strategy for consultation in the near future. The aim will be to cover all sectors of the economy and to engage all parts of the community -business, local Government, community groups, and individuals -in efforts to reduce greenhouse emissions. The preparation of the strategy will take account of responses to the Government’s previous consultation on the policies and measures which might be adopted to meet the UK ’s legally binding Kyoto target and to move towards the Government ’s domestic aim of a 20 per cent reduction in CO2 emissions from 1990 levels by 2010.

United Kingdom: Environmental Issues

Environmental conditions in the United Kingdom have improved in recent years. While some pollutants, such as nitrogen oxides, have not decreased substantially, sulfur dioxide emissions have. As a major component of acid rain, this reduction in sulfur dioxide has produced noticeable environmental benefits. Furthermore, the United Kingdom finds itself in the company of only three other Western European countries-Finland, Germany and Luxembourg-in experiencing a decline in carbon dioxide emissions since 1990.

The United Kingdom is an Annex I country under the United Nations Framework Convention on Climate Change. (Annex I countries include the countries of the Organization of Economic Cooperation and Development, as well as the countries designated as Economies in Transition). The European Union, as a whole, agreed to an 8% reduction below 1990 levels of a "basket" of greenhouse gases by the 2008-2012 commitment period. Among countries of the European Union, the United Kingdom agreed to a more challenging target of 12.5% below 1990 levels. The government went even further and suggested a domestic goal of 20% below 1990 levels by 2010.

Reductions of carbon emissions in the United Kingdom, as well as reductions in other pollutants, such as sulfur dioxide, have resulted primarily from deregulation of the electricity industry. Privatization led to a reduction in coal subsidies, thus narrowing the price differential between coal and natural gas. As consumers switch to natural gas, the benefits of burning this "cleaner" fuel are being realized.

Air pollution

The United Kingdom is concerned with both domestic and transboundary pollution. On the domestic front, the United Kingdom National Air Quality Strategy was launched in 1997, establishing targets for key pollutants such as nitrogen dioxide, ozone, particulate matter, sulfur dioxide, and carbon monoxide. One of the primary sources of air pollutants in the United Kingdom is road traffic. While the United Kingdom has fewer cars than many countries of continental Europe, they are driven more miles per year while public transport is used far less. Nevertheless, Environmental Minister Michael Meacher projects that particulate matter can be reduced 12% over the next five years, while benzene can be reduced 62%.

Central to realizing these pollution reduction targets is the United Kingdom's set of policies for an integrated transport system, the introduction of cleaner burning fuels, and improved vehicle technology. The integrated transport strategy requires improving all aspects of transportation, including construction of bike paths, increasing accessibility to bus routes, and improving fuel efficiency in automobiles. Other aspects incorporated into an integrated transport strategy include congestion charging, implementing parking fees at the workplace, and "gating", whereby traffic patterns are designed to stop automobiles in open areas where pollutants can be most easily dispersed. Pollution, however, does not only arise from domestic sources. Transboundary pollution from continental Europe accounts for a significant portion of particulate matter emissions in the United Kingdom. Thus, resolution of transboundary pollution requires cooperation with other members of the European Union (EU). On December 1, 1999 a new Protocol was signed under the UN Economic Commission for Europe Convention on Long Range Transboundary Air Pollution. Under this agreement, the United Kingdom set a ceiling of 625,000 tons per year (representing a 355,000 ton reduction from its existing commitment for 2010).

Energy Use and Carbon Emissions

In 1998, 37% of energy consumption was derived from petroleum, 34% from natural gas, 14% from coal, 12% from nuclear, 1% from hydro and the remaining 2% from other sources, including wind, solar,
tide and geothermal. The United King
dom's fuel consumption mix has
changed significantly over the past few
decades. While oil's share of total en
ergy consumption has remained fairly
steady, coal's share of total energy con
sumption has declined by 57% since
1980.

The large share of coal in the total fuel

00024.jpg

mix in the 1960's has been replaced by
natural gas, and to a lesser extent, nu
clear energy.
This fuel switch from the more carbon-intensive coal to less carbon-intensive fuels, such as natural gas, is reflected in the United Kingdom's total fossil fuel-generated carbon emissions. Carbon emissions in the United Kingdom have fallen from 167.4 million metric tons of carbon in 1990 to 147.4 million metric tons in 1998.

00025.jpg

Over the past eighteen years, energy consumption in the industrial sector has decreased slightly, energy consumption in the residential and commercial sectors has remained steady, and transportation sector energy consumption has risen fairly quickly. The industrial sector was the primary consumer of energy, accounting for 37% of total primary energy consumption in 1997 (a 5% decrease from 1980). The industrial sector was followed by the transportation sector (26.3% of total primary energy consumption), the residential sector (24.9%) and the commercial sector (11.8%). Energy consumption in the transportation sector has risen from 1.83 quadrillion Btu in 1980 to 2.56 quadrillion Btu in 1997, a 40% increase.

Carbon emissions from the industrial sector, as well as from power generation, have declined over the past 30 years. Again, this is partially as a result of the removal of subsidies in the coal industry, making cleaner-burning fuels like natural gas more competitive. While carbon emissions in these two sectors have fallen, carbon emissions from road transport have increased. In 1998, carbon emissions from the transport sector were responsible for 31.4% of total energy-related carbon emissions.

There are environmental ramifications from the United Kingdom's primarily offshore production of oil and gas, including oil entering the marine environment from disposal of contaminated water, and refineries discharging oil as waste. The Pollution Prevention and Control Act of 1999 attempts to integrate environmental regulations with offshore oil and gas production, as well as provide the government with more power for taking control of offshore accidents.

The United Kingdom has experienced three oil spills in the past seven years. There were two environmental alerts in 1993. In January 1993, 84,500 tons of crude oil spilled off of the coast of northern Scotland's Shetland Islands after a Liberianregistered tanker hit rocks in heavy seas. The most recent accident occurred in February 1996 when 40,000 tons of crude oil spilled, creating a four-mile oil slick.

Energy and Carbon Intensity

Energy intensity in the United Kingdom has
declined steadily over the past 18 years. In
1980, energy intensity in the United King
dom registered 11.70 thousand Btu per
$1990, decreasing to 8.59 thousand Btu
per $1990 in 1998, a 27% decline.

The carbon intensity of the United King
dom's economy has mirrored the trend in
energy intensity, but the decline has been
even more dramatic. Carbon intensity in
1998 registered 0.13 metric tons of carbon

00026.jpg

per thousand $1990, a 45% decrease from
1980 levels. The relatively larger decrease in carbon intensity, again, to a great extent, reflects the conversion from more carbon-intensive coal to less carbon intensive natural gas.

The decline in carbon intensity was tempered somewhat by an increase in road traffic. In general, the United Kingdom has been more successful in uncoupling sulfur dioxide emissions from economic growth than it has been in uncoupling carbon dioxide. Over the time period from 1970-1997, relative price changes have favored the use of the car over public transport, while at the same time freight transport has become relatively less fuel efficient.

The United Kingdom is likely to experience further declines in energy and carbon intensity in the near future. With an energy tax expected to become effective in April 2001, industries are examining ways to use energy more efficiently. While the Climate Change Levy will be introduced on the business use of energy, "clean" sources of energy will be exempt. Most combined heat and power (CHP), as well as solar and wind powered plants will be exempt.

The Climate Change Levy was initially announced in the March 1999 budget and is expected to prevent at least 2 million metric tons of carbon per year. In addition to the Climate Change Levy, the government has introduced several other new measures to improve energy efficiency.

The government has increased the amount of money available for energy efficiency, announced a target to increase energy generation through CHP by at least 10,000 MW by 2010, altered transport taxation to stimulate fuel efficiency, and agreed to measures on the European level to improve the fuel efficiency of new cars 25% by 2008.

Per Capita Energy Consumption

Although per capita energy consumption in the United Kingdom has risen gradually over the past 18 years, the increase is not
significantly different than other OECD
countries. In 1998, per capita energy con
sumption in the United Kingdom was 165.3
million Btu. This is slightly less than per
capita energy consumption levels in France
(170.0 million Btu), Germany (168.6 million
Btu) and, Japan (168.4 million Btu), and
significantly less than in Norway (420.9 mil
lion Btu) and the United States (350.7 mil
lion Btu).

Per capita carbon emissions have fallen

00027.jpg

over the past two decades, from 3.0 metric
tons of carbon in 1980 to their current level of 2.5 metric tons of carbon per person. Like per capita energy consumption figures, per capita carbon emissions in the United Kingdom also are comparable to most OECD countries.

In 1998, France emitted 1.8 metric tons of carbon per person, Japan, 2.0 metric tons of carbon per person and Germany 2.8 metric tons of carbon per person.

 

Renewable Energy

With introduction of the Climate
Change Levy in 2001, and its ex
emption for renewable energy re
sources like solar and wind, re
newable sources of energy are be
ginning to gain more attention. The
United Kingdom hopes to increase
the share of electricity generated
by renewables from the current
2%, to 10% by 2010. This effort
was recently bolstered when Blyth
Offshore Wind Ltd announced they

00028.jpg

would install two wind turbines off
the Northumberland coast this
year. The combined 4 megawatt (MW) capacity should begin generating electricity for 3,000 homes in August.

The Non-Fossil Fuel Obligation (NFFO), created by the Electricity Act of 1989, is the primary piece of legislation providing a premium price, market enabling mechanism which attempts to encourage renewable-based electricity generation. Under the NFFO system, the difference between the premium price paid to "green" electricity suppliers and the market price is financed by the Fossil Fuel Levy, a tax paid by licensed electricity suppliers and ultimately passed on to consumers.

The New Electricity Trading Arrangements (NETA) are currently being discussed and attempt to address new ways of ensuring that generators fuelled by "green power" can be competitive in the market. Discussions center around examining network access and charging arrangements to ensure that both combined heat and power and renewable energy sources have fair access to the distribution network at competitive prices.

United Kingdom Entering the 21st Century

Environmental conditions in the United Kingdom have improved over the past decades. With deregulation of the electricity industry and the removal of coal subsidies, conversion from coal to natural gas in industries and households quickly followed. Subsequently, sulfur dioxide emissions declined significantly. While carbon dioxide emissions decreased over this time period as well, this trend may not continue.

A rapid increase in the number of cars on the road could counteract many of the benefits obtained from reduced coal use. Reference case scenarios by the Energy Information Administration project that carbon emissions in the United Kingdom will rise to 181 million metric tons in 2020, up from 147.4 million metric tons in 1998. (This increase, however, represents a lower annual projected growth rate than much of the rest of the world.) Furthermore, since many industries and households already have moved away from coal to "cleaner" sources of energy, many of the least-cost options for carbon emissions reductions in these sectors already have occurred. Thus, much attention is being placed on the transportation sector, and the United Kingdom's integrated transport strategy.

Another important aspect of the United Kingdom's attempts to address environmental concerns include its interaction with the rest of the European Union. Unlike a few decades ago, when environmental concerns were predominantly local in nature, many of today's environmental problems are not constrained by national boundaries and the energy choices that one country makes may readily affect another. The United Kingdom's recent agreement to the Convention on Long Range Transboundary Air Pollution is just one example of the level of cooperation that will be needed to address international environmental concerns in the 21st century.

ENERGY CONSUMPTION
7. ENERGY CONSUMPTION INDICATORS AND STATISTICAL VIEW.

This chapter is focused on the analysis of an array of key energy consumption indicators, intended to secure some of the aims of this project.

Energy ratio
Energy consumption by sector
Industrial energy consumption and output Transport energy consumption
Domestic energy consumption
Service sector energy consumption

Energy ratio

The energy ratio is calculated by dividing temperature corrected primary energy consumption by GDP at constant (1995) prices. The energy ratio has fallen steadily, at about 1% per year since 1950, and in 1998 was 51% of its 1950 level. The downward trend in the ratio can be explained by a number of factors:

1. Improvements in energy efficiency

 

2. Fuel switching

 

3. A decline in the relative importance of energy intensive industries

4. The fact that some industrial issues, such as space heating, do not increase in line with output

00029.jpg

Chart 7.1
Energy ratio since 1950
Source: Office of National Statistics

Energy consumption by sector.

 

Transport is now the biggest energy user in the UK, accounting for 34%of final energy use in 1998.

 

Households are responsible for 29%of final energy use, whilst industrial consumption now accounts for 22%.

 

The remaining 15%of final energy is used by the services and agriculture.

 

Industrial energy consumption and output

 

Total industrial energy consumption has fallen by 44% since 1970.Over the same

 

00030.jpg

Chart 7.2
Final energy consumption by sector, 1970 to 1998 Source: Office for National Statistics

00031.jpg

Chart 7.3
Industrial energy consumptrion and output 1970 to 1998 Source: Office for National Statistics

period industrial output has risen by 49%.

 

As result energy consumption per unit of output has fallen by 62%since 1970.

There have been overall increases in energy efficiency over this period, but there has also been a decline in the importance of energy intensive industries and considerable fuel switching.

Engineering and metals, which include iron and steel, are the single biggest industrial consumers of energy, accounting for 28%of industrial consumption.

Other major sectors include the chemicals industry (20%of industrial consumption), food, beverages and tobacco (together 11%),minerals (8%)and paper, printing and publishing (7%).

The iron and steel industry saw reductions in the amount of energy use per unit of value added through the 1980s, despite some fluctuations.

The energy intensity of steel production in 1998 was 23% lower than in 1973.

 

Since the mid -1980s, the chemicals industry has seen output rising. In 1997 output was 71% higher than in 1980.

Energy use by the chemicals industry fell throughout the 1980s. It has increase since 1991 but remains well below the levels twenty years ago. Energy intensity in the chemicals industry is now 61% lower than in 1980.

The food, drink and tobacco industry now produces 37% more output and uses 18% less energy than in 1970. As a result, in 1997, energy consumption per unit of output had fallen by 41% since 1970.

Output by the minerals industry in 1997 was the same as in 1970, although it has range both above and below this level since 1970. Energy use decline throughout the period, although there were noticeable reductions in consumption in the years following the two oil price shocks in 1973 an 1979. Reduce energy consumption, together with almost unchanged output, has led to an energy intensity 60 per cent lower last year than in 1970.

Transport energy consumption

Energy consumption by the transport sector has increase over the last 25 years an this sector is now the biggest energy user in the UK, accounting for over a third of final energy use. Energy consumption in terms of distanced travelled, both for road freight and for road passengers, has remained relatively constant over this period. The increase in consumption is due to large increases in the distances being travelled by both passengers an freight, and the increase in the number of cars.

Fuel consumption in the rail and water transport sectors decreased by 27%and 8%respectively between 1970 and 1998.

 

00032.jpg

Chart 7.4
Industrial energy consumption and output, 1970 to 1998 Source: Office for National Statistics

00033.jpg

Chart 7.5
Industrial energy consumption and output, 1970 to 1998 Source: Office for National Statistics

Fuel consumption by road transport increased by 91%. Fuel consumption in the air transport sector more than doubled between 1970 and 1998.

Fuel consumption in the air transport sector more than double between 1970 an 1998. Fuel use by road passenger vehicles has increase by 81% since 1970. Over the same period the distance travelled by passengers has risen by 83%. Energy consumption per passenger km was broadly the same last year as in 1970. There has been a substantial increase in the number of cars, and a move away the from the use of buses and coaches.

Fuel use for freight transport has more than double since 1970, whilst the number of tonne kilometers has risen by 89%. Goods vehicles on average use more fuel per km than in 1970, but also carry more goods.

Energy consumption per tonne/km of goods transported remained relatively stable during the 1970s, appeared to have a general upwards trend up to 1992, decrease to 1995 and have remained at 1995 levels to 1998.

In 1970, each person in the UK travelled 8 ½ thousand kilometers by car on average. By 1997, each person was traveling an average of 10 ½ thousand kilometers on average, an increase of 20%. In 1970 nearly half of all households did not own a car whereas in 1997 less than a third were without a car.

Domestic energy consumption

Energy consumption by the domestic sector has increase slowly over the last 25 years with households now being responsible for more than a quarter of final energy consumption, having overtaken the industrial sector. This increase is mainly due to increase use of energy for space heating as the number of households has increase.

Domestic energy consumption rose by 21%between 1970 and 1997 and appears to be on a general upward trend despite fluctuations year-on-year.

 

The overall growth in energy use is largely a result of the increase in the number of households.

 

00034.jpg

Chart 7.6
Domestic energy consumption and number of households, 1970 to 1997
Source: Office for National Statistics

00035.jpg

Chart 7.7
Domestic energy consumption by final use, 1970 to 1997
Source: Office for National Statistics

Energy use per household is currently at a similar level to 1970.

 

Temperature has a noticeable impact on domestic energy consumption, and helps to explain some of the variation in consumption between years.

 

82% of the energy used in households is for space or water heating. It is therefore susceptible to weather conditions and, in particular, temperature variations.

Since 1970 energy use for space heating has risen by 18%, for water heating by 12%, and for lighting and appliances by 137%. In contrast, energy use for cooking has fallen by 19%.

Energy demand for central heating has increase since 1970. In 1970 5.6 million homes in Great Britain were centrally heated while 21.4 million homes were centrally heated in 1998. This represents an increase from 31% in 1970 to 89% of the housing stock.

Of all houses that owned central heating in 1998, gas accounted for 80% of all fuels use .

The total amount of electricity consume by domestic household appliances increase by 85% between 1970 and 1998. This increase was mainly from the cold and wet sectors. The main river behind the increased in miscellaneous goo s is the electric shower.

Ownership of loft insulation increase rapidly between 1974 an 1984. Since 1984, the overall percentage of houses with loft insulation has remained fairly steady, although the number choosing thicker insulation has been increasing. Between 1978 and 1990, grants were made available under the Homes Insulation Scheme to install hot water lagging an loft insulation, the two most cost effective forms of insulation.

Service sector energy consumption

 

Since 1970 energy use by public administration has decreased by 6%.

 

Over the same period, the value added by the sector, in real terms, has increased by 32%.

As a result, the amount of energy used per unit of value added was 29%lower in
1998 than in 1970; it has decreased at an annual average rate of about ½% since
1980.

Energy use by commercial and other services has been increasing since the mid 1970s, and in 1998 was 48% higher than in 1970.

 

Over the same period, the value added by this sector has grown faster, more than doubling in real terms.

 

Hence energy use per unit of value added in 1998 was 35%lower than in 1970, and 14%lower than in 1980.

 

00036.jpg

Chart 7.8
Final energy use and value added by public administration, 1970 to 1998
Source: Office for National Statistics

00037.jpg

Chart 7.9
Final energy use by commercial and other services, 1970 to 1998

Source: Office for National Statistics

8. MAIN TRENDS IN ENERGY CONSUMPTION.

This Chapter briefs recent trends in energy consumption in the UK.

UK oil and natural gas production has increased over the last two decades, while production of coal has declined. Consumption of the UK's own resources of oil is currently at a rate of 8 per cent of proven and probable reserves per year, while for natural gas the rate is 4 per cent, although additional reserves of oil and gas continue to be identified.

In the longer term, as existing energy resources become more scarce, energy prices can be expected to rise, encouraging greater fuel efficiency and boosting incentives to develop alternative sources.

Nuclear power stations currently account for 27 per cent, and renewable sources 2 per cent, of the UK's total electricity generation.

 

The energy ratio has fallen steadily, at about 1% per year since 1950, and in 1998 was 51% of its 1950 level.

Primary energy consumption in the UK has remained fairly constant since 1970, despite the 60 per cent increase in GDP, indicating that the economy has become more fuel-efficient overall. This has been attributed in part to the increase in world oil prices in the 1970s and early 1980s.

Over 30 per cent of primary energy is lost in the conversion to electricity and secondary fuels and in the distribution system. Information about conversion efficiency can be found in Chapter 9.

An increase in demand for electricity consumption of 133 per cent has been largely offset by falls in fossil and other secondary fuels. The increase in electricity demand is mainly due to an ever-increasing reliance on electrical equipment (information technology, medical and leisure equipment) and the growing use of air conditioning.

Energy consumption has been increasing since the early 1980s, due to increased demand in all sectors except industry. Further information on final energy consumption can be found in Chapter 10.

Total industrial energy consumption has fallen by 44 per cent since 1970. Over the same period industrial output has risen by 49 per cent. As a result energy consumption per unit of output has fallen by 62 per cent over the period. This reflects a decline in the importance of energy intensive industries and considerable fuel switching as well as real increases in energy efficiency.

Most of the improvement has been in the manufacturing sector where final energy consumption has fallen by 40 per cent, largely as a result of structural change. Energy consumption in the commercial sector - the fastest growing sector in the economy - has risen by 17 per cent (against the background of a 91 per cent increase in service sector output), although some energy efficiency gains have also been made here.

Total domestic demand was 25 per cent higher in 1998 than 1970. Part of this growth has been driven by the increase in households. The average energy consumption per dwelling was about the same in 1996 as 1970, despite a reduction in the heat loss of the average dwelling due to (a) more demanding building regulations for new buildings and (b) retrofitting of existing stock with various insulation measures and more efficient heating systems and appliances.

Transport demand has risen rapidly, by 90 per cent since 1970, mainly due to the increased use of cars, and now accounts for a quarter of total final energy consumption. Despite a rapid rise in air transport energy demand since 1970, energy use in transport continues to be dominated by road transport, which accounts for over three quarters of transport demand.

Fuel consumption is rising fastest in the road transport sector, and there has been no improvement in fuel efficiency over the last twenty years in terms of fuel used for passenger and freight transport, despite increases in the fuel efficiency of individual vehicles.

Domestic fuel prices increased by 11 per cent in real terms since 1970, mainly as a result of VAT at 8 per cent in April 1994, while real per capita incomes have increased by 65 per cent. Transport fuel prices have increased by only 2 per cent, although in recent years price rises have been larger as road fuel duties have been increased in real terms by 5 per cent a year. Industrial fuel prices in real terms are 10 per cent lower than they were twenty years ago; price reductions have been particularly marked in recent years as added competition between energy suppliers has exerted downward pressure on prices.

It’s obvious that energy consumption grows rapidly. The key sustainable development objectives, which are to ensure supplies of energy at competitive prices, to reduce adverse impacts of energy use to acceptable levels, and to encourage consumers to meet their needs with less energy input through improved energy efficiency explain the need to investigate the trends of energy efficiency and energy intensity of UK shown in Chapter 11.

9. CONVERSION EFFICIENCIES: THE IMPACT OF INCREASING ACTIVITY, EFFICIENCY AND STRUCTURAL CHANGE IN THE ECONOMY.

This Chapter examinates the conversion efficiencies and shows the trends in the relationship between primary and final energy consumption since 1970.

An examination of the trends in primary and final energy consumption, in total and by sector, can illuminate the way in which energy is used to derive economic benefits for the community. The major user categories, which are examined, are industry, services, transport and households. While trends in the amounts of fuel consumed are relevant, it is also important to monitor their relationships with other indicators to determine their effectiveness of use. Comparisons are therefore made with GDP and value added, traffic growth and, for domestic consumption, with the number of households.

Primary energy consumption has remained relatively static over the last 25 years though it has been influenced by sudden changes in external factors affecting price levels, such as wars in the Middle East, the OPEC oil crisis as well as the economic cycle in general (See Chart 10.1. Following peaks of around 220 million tones in 1973 and 1979, primary energy fell below 200 million tones in the early 1980s but has since climbed back to around 220 million tones. Over 30 per cent of primary energy are lost in the conversion to electricity, to other secondary fuels and in the distribution network. The ratio of primary to final consumption has hardly changed over the period. Use of waste heat from power generation can increase the efficiency of fuel use up to 80 to 90 per cent and the Government has a target of installed capacity of Combined Heat and Power (CHP) of 5,000 megawatts by the year 2000. Table 1 shows the trends in the overall inland energy conversion loses, distribution losses and energy industry use, total inland primary energy consumption and total final energy consumption.

The conversion efficiencies indicators on conversion efficiency show changes in how good the UK are at converting primary fuels into secondary fuels. As efficiency improves less primary fuel is require to produce the same quantity of secondary fuel as before. Potentially this can affect how long our primary fuel resources are likely to last.

Table 1. Inland Energy Use, Source ONS Million tonnes of oil equivalent

 

1970 1980 1990 1996 1997 1998
Conversion losses
51.5 48.4 51.0 50.8 50.5 51.7
Distribution losses and Energy industry use 15.0 15.0 16.6 20.9 20.5 20.8
Total final energy consumption 146.0 142.4 147.3 158.5 154.5 156.3
Total inland primary energy Consumption 212.5 205.7 214.9 230.3 225.6 228.9

Temperature corrected Total 211.9 206.2 221.6 229.2 231.7 235.2

In 1998 fuel input to electricity generation in the UK (912 TWh) produce a net supply of 326.5 TWh implying that all but 37 per cent of the energy content of the fuel were lost during the conversion to electricity. However, conversion efficiencies were much lower in 1980 (31 per cent) and lower still in 1970 (29 per cent). Some of this increase in conversion efficiencies is due to using more efficient types of power station, but some is also due to increase efficiencies within power plants.

Conversion efficiencies are therefore a sound way of monitoring these efficiency gains.

Since 1970 overall conversion efficiencies in the electricity industry have increase because nuclear and, more recently, CCGT stations have come on stream to meet the expanded demand for electricity. At the same time many smaller, older and less efficient coal and oil fire conventional steam stations have been close. Nuclear stations currently operate at about 37 per
cent efficiency and combined cycle
gas turbine stations at 47 per cent
efficiency whereas conventional
steam stations in the 1970s were
frequently only 25 per cent efficient,
although modern conventional steam
stations run at base load can reach
over 36 per cent efficiency.

00038.jpg

Chart 9.1
Ratio of final to primary energy consumption 1970 to 1998 Source: Department of Trade and Industry. 1995

Conversion efficiencies since 1970 are
shown in index form in Chart 9.2. (All
conversion efficiencies are expressed
in gross calorific value terms.)

The ratio of final consumption to
primary consumption has remained
stable since 1970.

The difference between primary
consumption and final consumption is
accounted for by losses during
conversion to secondary fuels, losses
during distribution an energy industry

00039.jpg

use. This difference has remained at
around 30% of primary consumption,
with improvements in conversion
efficiencies being offset by increase

Chart 9.2
Ratio of fuel use for electricity generation to electricity used by final users 1970 to 1998 Source: Department of Trade and Industry.

use of electricity by final users.

Final users consume 61% more electricity in 1998 than in 1970. Over the same period total fuel use for electricity generation has risen by only 23%. As a result the overall conversion ratio has fallen by 25% since 1970.

Chart 9.3 shows the Refinery losses
relative to refinery throughput, 1970
to 1998.

For much of the 1970s refinery
losses represented over 1% of
refinery throughput. By 1995 this
ratio has fallen to less than 0.2%,
but rose to 0.25% in 1998.

Losses include actual volumes lost
during the refinery process, through
leakage for example. However, the
figures also include losses which
arise through conversion
differences, that is if x litters of
aviation fuel are reclassified to x
litters of gas diesel oil which balance,
and then are converted to the
equivalent weight, a difference

00040.jpg

Chart 9.3
Refinery losses relative to refinery throughput, 1970 to 1998 Source: Department of Trade and Industry 1995

occurs. It is this difference which is included in the figures for refinery losses.

 

00041.jpg

Chart 9.4
Proportion of gas flaring to oil production 1970 to 1998 Source: Department of Trade and Industry 1995

The proportion of gas flaring to oil production fell until the mid -1980s (See Chart 9.4). The rise thereafter

00042.jpg

Chart 9.5
Ratio of final energy consumption to primary energy consumption in OECD countries, 1997 Source: International Energy Agency

was a consequence of Piper Alpha and subsequent safety work. It fell steeply in 1995, and has continued at this level over the past two years. In 1998 it was below the low level seen in 1986. Even at its recent peak in 1990 the ratio was still of the peak level in the late 1970s.

International comparisons: Differences between countries in this ratio reflect differences in the relative importance of primary and secondary fuels (particularly electricity). They also reflect differences in overall conversion efficiencies, due in part to the different mixes of fuels use to generate electricity.

The UK has seen a slight improvement in this ratio since 1970 (See Chart 9.5) a steady increase in the proportion of final consumption accounted for by electricity has been more than offset by improvements in conversion efficiency.

Most G7 countries have experienced a decline in the ratio since 1970. This is shown on Chart 9.6.

 

00043.jpg

Chart 9.6
Ratio of final energy consumption to primary energy consumption, 1970
Source: International Energy Agency

10. FINAL ENERGY CONSUMPTION.

This chapter provides a statistical overview of the level and pattern of final energy demand in the United Kingdom. Final demand for energy means demand by all users other than the energy industries themselves. It can be analyzed in various ways and this chapter considers its break down by fuel - oil an natural gas account for three quarters of the total; by sector - transport and the domestic sector account for nearly two thirds; and by end use - mainly in buildings, especially for space heating, and in road transport. Energy demand can also be analyzed in relation to the activities for which it is use , to see whether it is use more efficiently over time. This is discussed in Chapter 11.

In 1998 final energy demand in the United Kingdom was 156 million tones of oil equivalent (mtoe), which was roughly equal to 2.7 tones of oil equivalent (toe) for every man, woman and child in the UK. Some 229 mtoe of primary energy and equivalents were needed to meet this demand. This Chapter is examines the energy actually delivered to the main consuming sectors (industry, transport, the domestic sector and services) but it should be remembered that on average this delivered energy represents only about 70 per cent of the primary energy actually use to produce it, though the percentage will vary from sector to sector.

TOTAL DEMAND BY SECTOR

Chart 10.1 shows by percentage shares how final consumption has been broken down by consuming sector since1970.

The percentage shares of the 1998 total of 156 mtoe are set out in.

Transport is the biggest energy user, consuming 54 mtoe, about one third of the total, followed by the domestic sector, which accounts for 29 per cent. industry accounts for about one quarter and the service sector as a whole for around 15 per cent. The service sector is sometimes divided into two separate sectors, private commercial services such as offices, shops and restaurants, and mainly public services such central and local government offices, education and
health. In 1998 private commercial
services accounted for 8 per cent of the
total and public services or 5 per cent.

00044.jpg

Chart 10.1
Final energy consumption by sector, 1998 Source: Estimated by DTI from BRE, ETSU and the Department of the Environment, Transport and the Regions

Sectors between them accounted for only

 

1.5 per cent of final energy use in 1998.

Over the past quarter of a century there
has been little change in total final de
mand for energy. There have been
sizeable fluctuations from year to year
such as the increase of 7 per cent in 1996
compared to 1995, followed by a
decrease of 3 per cent between 1996 and
1997. This was due to particularly cold
weather during the winter months in 1996.

00045.jpg

In 1998 the total was still only 7 per cent Chart 10.2 higher than in 1970. The relative Final energy consumption by sector, 1970 to 1998 importance of the main sectors has Source: Department of Trade and Industry change considerably over this period ,
however, as Chart 10.2 shows. In 1970 industry was the largest sector, accounting for 43 per cent of final consumption, and transport was in third place with a share of under 20 per cent. The relative positions of these two sectors has gradually been reverse. So although overall final consumption has increase by only 7 per cent since 1970, transport use has increased by about 90 per cent and that of industry has fallen by 44 per cent. Domestic energy consumption rose by 24 per cent over this period and that of the service sector by 17 per cent.

TOTAL DEMAND BY FUEL

Since 1970 the share of solid fuel in final demand has fallen from 31 per cent to only 3 per cent, whilst that of natural gas has increased from 3 per cent in 1970 (town gas share was 7 per cent) to 36 per cent and that of electricity from 11 per cent to 17 per cent.

The percentages for selected years are illustrated in Chart 10.3. The chart shows that the overall petroleum share has changed less than that of the other fuels over the period , but in fact outside transport the petroleum share has fallen from 35 per cent in 1970 to only 13 per cent in 1998. This is illustrated in Chart 10.4. This fall has been offset by the rise of some 91 per cent in transport use: petroleum accounts for nearly all the fuel use in the transport sector.

00046.jpg

Chart 10.3
Final energy consumption by fuel, 1970 to 1998 Source: Department of Trade and Industry

This has affected the product mix of consumption, since whereas the transport sector uses petrol (motor spirit), diesel and aviation turbine fuel, other sectors use mainly fuel oil, gas oil and burning oil. Consequently, whereas consumption of petrol, diesel and aviation turbine fuel rose by over 100 per cent between 1970 and 1998, that of all other petroleum products for energy use fell by around 70 per cent.

00047.jpg

Chart 10.4
Final non-transport energy consumption by fuel, 1970 to 1998

Source: Department of Trade and Industry

Most coal is now use in power stations and final demand accounted for only 8 per cent of gross inland consumption of coal in 1998 compared with nearly 30 per cent in 1970, when the domestic sector still use large quantities of coal for space heating. Consumption of coke and breeze by final users also fell sharply during the 1970s, from 13 mtoe in 1970 to under 4 mtoe in 1980, but has shown no further net fall since then.

TOTAL DEMAND BY END USE

Outside of transport nearly all energy is use in buildings (to heat, light or cool them, or in domestic or commercial electrical appliances), or for industrial processes, whereas in transport more than three quarters of it is use for the propulsion of road vehicles. And as stated overleaf, about one third of all use is for transport and two third s for the other sectors.

Thus a break down of energy consumption by end use needs to distinguish transport from other sectors and that is one in Chart 10.5, which covers non-transport use only. No end use break own is available for agriculture and construction, which account for only a small proportion of consumption. More than half of non-transport energy is needed for space and water heating, as the chart illustrates.

00048.jpg

Chart 10.5
Non-transport energy consumption by end use 1997 Source: Department of Trade and Industry

About one quarter is use in industry for process use and motive power and the remainder for appliances and other miscellaneous uses. Data for the service sector are only available for 1996, and it has been assumed that the proportions of energy use for each end use has remained the same.

Chart A10.6 shows that energy use for space and water heating (the dominant end use) is mainly in the domestic sector although it is significant in private and public services also. The high relative importance of space and water heating helps to explain the proportion of natural gas in total consumption. More than 89 per cent of homes and estimate two thirds of offices have full central heating, with gas the preferred fuel in most cases.

The spread of central heating appears in fact to have been the major factor in the big rise in the proportion of gas in total demand since 1970.

00049.jpg

Chart 10.6
Space and water heating demand by sector 1997 Source: Estimated by DTI from BRE, ETSU and the Department of the Environment, Transport and the Regions

DOMESTIC SECTOR

Within the overall increase of 22 per cent, consumption for water heating has grown rather more slowly, by about 11 per cent, and consumption for cooking has fallen by about 18 per cent, but use of electricity for lighting and domestic appliances (other than cookers) has more than double . Despite the rapid rise in lighting and appliance use these still only account for about 12 per cent of the total and space and water heating continue to dominate domestic demand for energy with 82 per cent of the total. Space heating increase by more than 11 per cent between 1996 and 1997 as a result of the colder weather during the winter of 1996.
The large fall in cooking demand is partly explained by a change in lifestyle, with more convenience foods and more eating out, but it is slightly misleading, however, in that small cooking appliances, such as kettles, fat fryers an toasters, are

00050.jpg

Chart 10.7
Domestic consumption by end use 1970 to 1998 Source: BRE

00051.jpg

Chart 10.8
Number of homes with insulation in 1998 Source: BRE

exclude from the definition of cooking use in the table. If these, plus other appliances use in the kitchen such as food processors, are included , then there is an increase in cooking use over the whole period since 1970. By contrast electricity consumption for electrical appliances, such as TVs and videos, and noncatering electrical appliances has been increasing steadily throughout the period . Chart 10.7 shows the trends over the period.

There has been a large fall in energy intensity in the domestic sector since 1970, and that both insulation measures and more efficient heating systems and appliances have been the main contributing factors in this improvement.

At the end of 1998 only 12 per cent of all homes in Great Britain had no insulation - 93 per cent of homes with lofts had loft insulation, 80 per cent had draught proofing, 68 per cent had double glazing and 95 per cent of homes with hot water tanks had them insulate (Chart 10.8).

The most straightforward way of introducing insulation into the home is through the use of cavity walls. At the end of 1998, 27 per cent of homes with cavity walls ha them insulate .

The fact that there has been a rise in space and water heating energy demand despite the huge savings means that there has been a big rise in the quantity of heat supplied . This is partly the result of rising household numbers (there were nearly 30 per cent more households in 1998 than in 1970, although average household size has fallen) and partly the effect of higher comfort standards - more rooms heated and higher average temperatures. BRE estimate that average internal temperatures have increase from 12.8TC in 1970 to some 17TC, with the bulk of the increase due to the rise in the proportion of dwellings with central heating from 33 per cent to 89 per cent over the period . In individual years part of the fluctuation in energy use for space an water heating reflects changes in external temperatures since the requirement for fuel for space heating in a particular welling will of course be a function of the difference between inside an outside temperatures.

There has also been a considerable rise since 1970 in the efficiency of lighting an of many electrical appliances, accompanied by rapid increases in the proportion of households owning consumer durables over this period
The net effect of these changes, together with a large rise in lighting use, which has probably resulted mainly from a shift away from rooms lit by single ceiling bulbs towards multi-source lighting from wall and table lamps, has been a rise in appliance and lighting demand of some 133 per cent. Out the ownership of many household appliances such as washing machines is leveling off. The ownership of fridge-freezers, dishwashers, VCRs and microwave ovens is still rising rapidly, however.

Work by the DECADE team at the University of Oxford’s Environmental Change Unit has produced detailed estimates of lighting and appliance use by individual appliance type for the period since 1970. Changes since then by

broad group are shown in Chart 10.9, which shows that “cold ” appliances are the largest sub-sector in this group, with consumption in 1998 of 17.5 TWh, followed closely by lighting. Wet goo s (washing machines, tumble dryers an dishwashers) an brown goods (TV etc.) each use 8-10 TWh. Cooking appliances as defined in this chart include small appliances an food processors an the coverage is therefore wider than in the overall break own of domestic energy use discussed above.

Given the continued dominance of heating use (which nowadays is largely met from natural gas) in the total, it is not surprising that natural gas now accounts for about two thirds of domestic consumption; by contrast natural gas and town gas together accounted for only one quarter of domestic consumption in 1970. Coal an other solid fuel use have both fallen sharply since 1970, but electricity use has increase by 42 per cent, the increase being due to the increasing number an variety of electrical appliances rather than to its use for space or water heating, which has fallen.

00052.jpg

Chart 10.9
Electricity consumption by
household appliance type, 1970 to 1998 Source: DECADE

There is scope for further improvements in energy efficiency. Although spaceheating demand is leveling off there is still a lot of scope for savings from further insulation measures, especially cavity wall insulation. In addition the continued rapid growth in demand for electricity for appliances means that an increasing proportion of the energy saving opportunities in the domestic sector lie here.

Almost 4 per cent of average household expenditure are on fuel, light and power. However, this average figure conceals considerable variation between households: lower income households ten to spend a much higher proportion of their income on fuel than the wealthier households - about 8 per cent for the lowest 20 per cent of households by income compare with an average of under 3 per cent for the highest 40 per cent.

INDUSTRY

Between 1970 an 1998 the total fell by 44 per cent (compare with a rise in all the other main sectors): most of the fall took place between 1979 an 1984. Fuel use is more varied than in the other sectors, with natural gas being the main fuel (accounting for just over 40 per cent of the total) electricity accounting for just over a quarter and oil nearly a fifth.

Coal and derivatives (including coke oven gas) also have a share of about one fifth, although most of it is coke, use primarily in the iron and steel industry. The fall in consumption since 1970 has been in petroleum (own by 78 per cent) a solid fuel (own by 88 per cent), whereas electricity consumption increase till 1990 (though there has been no further significant rise since) an natural gas use rose dramatically during the early 1970s, since when it has been on a fairly level trend. These conflicting trends are shown in Chart 10.10.

The relatively varied pattern of fuel use within industry reflects the varied end uses to which industrial energy is put. The most recent analysis

of industrial energy consumption by end use is for 1997 and the percentage break own is shown in Chart 10.11. The chart shows 9 end use categories but the only significant ones are high and low temperature processing (some 28 per cent and 21 per cent respectively), drying/separation (16 per cent) and space heating and lighting (14 per cent). These estimates were compile by the Energy Technology Support Unit (ETSU) who have estimate the break own by 16 different subsectors of industry.

00053.jpg

Chart 10.10
Industrial energy consumption by fuel, 1970 to 1998
Source: DTI

The percentages in Chart 10.11 show that the different sectors are very different in their pattern of end use. High temperature processing dominates energy consumption in the metals an minerals sectors (iron & steel, non-ferrous metals, bricks, cement, glass & potteries), whilst low temperature processing is the most important single end use in chemicals and food, drink and tobacco. (The line between low and high temperature use is sometimes difficult to raw, especially in chemicals). Space heating and lighting are the main end uses in the engineering group of industries (mechanical engineering, electrical engineering and vehicles), an in the miscellaneous group of industries. Drying and separation is important in papermaking.

The main high temperature process uses of energy are coke ovens, blast furnaces and other furnaces, kilns and glass tanks. Low temperature process uses include process heating anddistillation in the chemicals sector; baking and separation processes in food and drink; pressing and drying processes in paper manufacture; and washing, scoduring, dyeing and drying in the textiles industry. Motive power is use for pumping, fans (mainly in the high temperature industries and chemicals), machinery drives, compressors (for both compressed air supply and for refrigeration) and conveyor systems.

00054.jpg

Chart 10.11
Industrial energy consumption by type of use 1997 Source: ETSU estimates, adjusted for consistency with the Digest of UK Energy Statistics.

The more varied pattern of fuel use in industry mentioned above is a reflection of the different end uses in industry. Electricity accounts for nearly all energy use for compressed air, motors & rives and refrigeration (and of course lighting) but is relatively unimportant for the other end uses which remain the most important ones. Solid fuel is the dominant fuel for iron & steel manufacture (where it is mainly use in the form of coke and cement), but process energy in most other sectors comprises a mixture of fossil fuels and it is not easy to obtain a reliable break own of fossil fuel use for steam raising.

SERVICE SECTOR

In the sector as a whole space heating alone accounts for over half the total and space and water heating between them for over 65 per cent. Lighting accounts for 13 per cent, more than in other sectors.

Of the remaining end uses, only catering and air conditioning are significant in terms of energy use. The percentage shares of the end uses covered are shown in Chart 10.12.

There are, for example, significant differences between the subsectors making up private commercial services (nine are shown separately in the table) and the three subsectors (public administration, education and health) which are predominantly in the public sector. Space and water heating are rather less dominant in the

private commercial sector, lighting more important, and cooling and process energy relatively much more important. Lighting accounts for 31 per cent of retail use, and catering use is of course most important in hotels and restaurants, where however it still accounts for only 13 per cent of the total.

Among the sub-sectors, which are mainly in the public sector, health is the largest, accounting for over 49 per cent of public sector use. It is the main source of demand for hot water, catering services, cooling and miscellaneous non-process uses. The largest space heating and lighting demand , however, is for education, whilst public a ministration was the largest energy user for other process. Overall space and water heating between them account for nearly three quarters of all energy use, with lighting (9 per cent) and catering (4 per cent) as the only other substantial end uses.

00055.jpg

Chart 10.12
Industrial energy consumption in the service sector by end use 1996
Source: Building Research Establishment.

Electricity accounts for about 33 per cent of the total – a higher share than in other main sectors. But the importance of electricity varies sharply by end use: in space and water heating its share is 11 per cent, whereas in all other uses together the average electricity share is 84 per cent. The greater importance of lighting and air conditioning in the private commercial sector means that electricity accounts for a larger share in private than in public services.

As elsewhere there has been a massive switch to natural gas and electricity from solid fuel and petroleum. Electricity consumption is rising more rapidly than in any other sector (133 per cent), increasing the total primary fuel input for which this sector is either directly or indirectly responsible.

TRANSPORT

The “end use” break own in the transport sector is by mode of transport rather than by activity as it is in buildings-related energy consumption. Petroleum accounts for 99 per cent of transport energy use, the other 1 per cent consisting of electricity. There was some solid fuel use in rail transport until 1990. The 1 per cent of electricity use is in rail transport and in transport premises, but even rail transport use is mainly petroleum.

00056.jpg

Chart 10.13
Energy use by type of transport, 1970 to 1996
Source: DTI

Changes in the shares of the main modes of transport since 1970 are shown in Chart 10.13

The chart shows that road transport, and road passenger transport in particular, already held a dominant place in 1970 and has retained this dominance since, the main changes over the period being the rise in the size of the sector overall, the growth in the share of air transport and the fall in that of rail transport. In 1998 road transport accounted for 76 per cent of the total (more than two thirds of it road passenger transport) and air transport for 19 per cent. Rail and water transport were of relatively little significance in respect of fuel use.

Fuel use in transport is thus dominated by road transport. In 1998 it is estimate

 

00057.jpg

Chart 10.14
DERV use by type of vehicle, 1983 to 1996 Source: Derived from data from the Department of the Environment,
Transport and the Regions.

some 84 per cent.
that 60 per cent of road fuel consisted of petrol, 95 per cent of which was use in private cars and taxis, whilst the remainder was DERV, mostly consume by goods vehicles including light vans. Buses and coaches accounted for less than 3 per cent of energy use by road transport, and motorcycles for less than one half of 1 per cent.

There has been some reduction in the share of passenger road transport in recent years. It is estimated that between 1983 and 1997 fuel use for private cars and taxis increase by 41 per cent and that use by goods vehicles and light vans by 59 per cent. Within the goods sector there was a trend toward the use of larger vehicles, with fuel consumption by heavy goods vehicles with 3 or more axles increasing by

There have been two significant changes in road transport use of energy over the past decade. The first has been the rapid rise in the proportion of unleaded petrol since its introduction in 1988, reaching 72 per cent of petrol sales in 1997. Over the same period sales of 4 star petrol have fallen sharply, whilst those of super premium unleaded, after rising initially, have been falling since 1993 compare with premium unleaded. The second major change has been the rise in the proportion of DERV, from a quarter of road transport fuel in

1983 to just over 40 per cent in 1997. Petrol consumption rose only 14 per cent over this period compare with a rise of 142 per cent for DERV. Although in absolute terms most of the increase in DERV use was in goods vehicles the biggest percentage increases were in light vans and in private cars: the proportion of DERV of all fuel use by cars and taxis rose from 1 per cent to 15 per cent between 1983 to 1997 (see Chart 10.14). These factors, and the rise in DERV consumption in particular, have had implications for the trend in energy intensity in transport. This is discussed in the Chapter 11 on energy efficiency.

11. ANALYSIS OF THE FACTORS DRIVING CHANGES.

This Chapter considers factors driving changes in energy consumption in the UK in four main sectors (industry, domestic, services and transport) and available energy supply.

There are a number of factors, which contribute changes in energy consumption of UK last 25 years.

Those factors are in close relationship with the Government’s policy of secure, diverse and sustainable supplies of energy at competitive prices. They are influenced by the major objective to achieve a balance between the need, on the one hand, for economic growth and, on the other, the need to reduce the impact of energyrelated emissions on the environment, since historically economic growth has marched hand in hand with increased energy consumption.

The factors are:
1. Depletion of fossil fuels;

2. Increase of the population and the number of households;
3. Temperature changes;

4. Changes in the structure of industry, with a relative or absolute decline in the output of the most energy intensive industries;

5. Fuel switching;
6. Development of new technologies and new energy sources;
7. Growing use of electrical equipment;
8. Changes in the efficiency, with which industry uses energy;
9. Changes in energy prices and energy costs;
10. Environmental changes;
11. Government policy and regulation and international agreements

All these factors could be generalizd in three major trends:
• Changes in energy intensity
• Changes in energy efficiency
• Changes in Carbon Dioxide and other green gases emmissions

This Chapter considers energy intensity and energy efficiency trends in close relationship with the environmental aspect of energy consumption.

 

ENERGY INTENSITY

This section refers to the importance of improving energy intensity as a way of reducing energy costs and needs (and therefore environmental damage) for a given level of economic development. Progress in reducing energy demand in this way, in a particular sector or sub-sector, or in the whole economy, can be measured by comparing levels, or changes over time, in energy intensity, which is defined as energy consumption per unit of activity.

Energy intensity is not the same as energy efficiency because it is affected by changes in the pattern of activity within a sector (structural change) as well as by genuine efficiency changes, and because activity in some sectors can be measured in more than one way; but as indicated below, for most sectors changes in intensity will be primarily due to changes in efficiency and can serve as a reasonable proxy for them.

Such changes may be due to the introduction of specific measures to save energy, such as insulation measures or new and more energy -efficient machinery. Or the may be a by-product of new processes or equipment introduced for other purposes. Sometimes there can be a decline in energy efficiency, at periods of low capacity utilization for example, leading to an increase in energy intensity.

For the economy as a whole energy intensity is measured by the energy ratio, defined as overall consumption of primary energy per unit of gross domestic product (GDP). In the UK the ratio was 305 tones of oil equivalent (toe) per 1 million of GDP (at 1995 prices) in 1998, a fall of 40 per cent since 1970 and of 9 per cent since 1990. Changes in industrial energy intensity have been mainly responsible for the fall since 1970, although energy intensity has also fallen over the period in the service sector.

This section describes changes in intensity over the past two decades in the main consuming sectors (industry, transport, the domestic sector and services) and in the energy producing industries themselves.

INDUSTRY

Industry was the largest energy-using sector until just over a decade ago. It now uses less than the transport and domestic sectors and the huge drop over the past couple of decades has been responsible for most of the reduction in the overall energy ratio over this period. In 1970 industrial demand for energy was 62 million tones of oil equivalent (mtoe). It peaked in 1973 at 65 mtoe and then fell fairly consistently to reach a low point of under 3 mtoe in 1993. It has been fluctuating at around the 3 mtoe level since.

Electricity demand has been rising, by 45 per cent since 1970, but it still accounts for only one quarter of industrial energy demand: consequently its rise has only offset the fall in fossil fuel demand (which is down by almost half over the same period) to a limited degree.

The rise in the electricity share has been more important in primary energy terms because electricity requires a much bigger input of primary energy than an equivalent amount of fossil fuel. Even so total primary energy demand has also fallen over the period because increased fuel use for electricity generation has been more than offset by a decline in the fuel used to produce other secondary fuels such as coke, breeze, and town gas, by the decline in the direct use of primary fuels, and - especially -by efficiency improvements in the generation industry.

Industrial energy intensity is normally measured in relation to industrial output. Between 1970 and 1998 the index of industrial production rose by 40 per cent. Over the same period industrial energy consumption fell by 44 per cent and so, overall energy intensity in the industrial sector fell by a massive 60 per cent. The decline has been fairly steady - much more so than the fluctuations in industrial output and in energy use - despite occasional periods such as 1989-1990 when it was temporarily halted.

The reduction in intensity since 1970 has had three components: changes in the structure of industry, with a relative or absolute decline in the output of the most energy intensive industries; fuel switching; and an increase in the efficiency with which industry uses energy.

Fuel switching is generally regarded as part of energy efficiency and is often undertaken in order to reduce energy costs per unit of output (though because of differences in the prices of different fuels this may not always reduce the volume of energy per unit of output). Sometimes however a switch from fossil fuel to electricity may reduce energy efficiency but have other advantages.

The impacts of industrial restructuring and energy efficiency changes cannot be entirely separated because this would require more detailed information than is available. Even when man sub-sectors of industry are separately identified in the energy consumption statistics, one cannot always be sure whether a change in energy use per unit of output in one of those sub-sectors is due to more efficient use of energy or to different product proportions within that sub-sector.

Nevertheless it is easier to estimate the impact of structural change when energy consumption is known for a large number of industrial sub-sectors. In some past ears the ONS (formerly the CSO) has conducted Purchases Inquiries in which energy purchases have been separately estimated for over 200 separate industrial sectors.

Two of the years in which there were such Inquiries were 1979 and 1989, and an earlier DTI study (Energy Paper 64, Industrial Energy Markets: Energy Markets in UK Manufacturing Industry, 1973 to 1993) estimated that over the decade between the two Inquiries the combined effects of structural change and energy efficiency reduced industrial energy use by nearly 1 mtoe below what it would otherwise have been, and that four fifths of this was due to improved energy efficiency.

On the basis of more limited evidence the same stud concluded that between 1973 and 1979 also the reduction in energy intensity was largely due to improved efficiency.

Although some industrial sub-sectors were covered by Purchases Inquiries in 1994, 1995,1996, 1997, and 1998 not enough energy -related information was obtained to permit a similar exercise. Some estimate of the contribution of structural change since 1989 may, however, be obtained by estimating what total industrial energy consumption would now be if in each of the sub-sectors covered by the 1989 Inquiry energy consumption had changed in proportion to the change in the output of that sub-sector.

Such a calculation suggests that between 1989 and 1998 industrial energy intensity fell by a further 6 per cent and that unlike the experience of earlier periods up to half this fall may have been due to structural change.

Over the whole period since 1970 however more than three-quarters of the fall in intensity is believed to be the result of higher efficiency. An exercise of this sort is fraught with difficulties and these conclusions must be regarded as tentative.

The evidence does suggest however that, important though structural change may have been in certain sub-sectors, improvements in efficiency have been the main factor in the remarkable reduction in industrial energy consumption since the earl 1970s.

DOMESTIC SECTOR

 

An estimated 82 per cent of domestic energy use was for space and water heating in 1997 (See Chapter 10).

The remaining end uses (cooking, lighting and appliances) thus account for only 18 per cent of delivered energy: but because, unlike space and water heating, the consist largely of electricity and because this is where most conversion losses occur their share rises to over 30 per cent when expressed in terms of the primary fuel inputs needed to meet domestic energy demand.

Consumption of electricity for lighting, “white goods”, “brown goods” and other non-heating uses has grown rapidly since 1970, by well over 100 per cent, but electricity use for space heating has fallen and so the overall rise in electricity use of 42 per cent is much less than that of natural gas, which now dominates space and water heating as explained in Chapter 10.

00058.jpg

Chart 11.1.
Domestic energy use per household and per person, 1970 to 1997
Source: Department of Trade and Industry, Office for National Statistics.

Domestic energy consumption has increased by 25 per cent since 1970. Energy intensity in this sector cannot be estimated unambiguously, as it can in some sectors, because there are a variety of ways of measuring domestic sector “activity” or output. The sector’s contribution to the output measure of GDP (i.e. value added) cannot be measured as it can for industry and services. Chart 11.1 looks at two possible ways of analyzing the changes in domestic demand for energy: in demand per head and per household. These two measures tell different stories; consumption per head has risen since 1970 while consumption per household has fallen modestly (the number of households has increased by nearly thirty per cent), except in 1996. The increase in 1996 is largely due to the particularly cold weather during the winter months.

None of these indicators measures energy –using activity as such - the provision of heat and hot water, food preparation, lighting and the use of electrical appliances of various kinds.

Activity as measured by these has increased much faster than the population or the number of households, because the average household is warmer than it was in 1970, uses more hot water and makes much more use of domestic electrical appliances of various kinds. The most important of these uses from the energy point of view are space and water heating, which as stated above still account between them for over 80 per cent of domestic energy consumption despite some reduction in the percentage since the early 1970s.
Efficiency changes in space and water heating are basically the result of changes in the efficiency of heating s stems and appliances and in levels of insulation. The Building Research Establishment (BRE) estimate that between 1970 and 1997 consumption for space and water heating increased by just over 5 mtoe, although it decreased by 13 per cent between 1995 and 1997, but that if insulation levels and heating appliance efficiencies had remained at their 1970 levels the increase could have been 2 mtoe. This can be regarded as the output effect, a combination of more households and more comfort per household. On this basis energy consumption per unit of output in space and water heating fell by approaching 40 per cent over the period. (This estimate assumes that the only factors affecting the intensity of use for these purposes are efficiency
changes from more insulation and better
heating s stems, which is not quite accu
rate.)

The rest of domestic sector consumption
relates to a variety of appliances for
cooking, washing, freezing, entertain
ment, and lighting, home office and
some other miscellaneous uses. For
some of these groups of appliances out
put can be measured by changes in the
number of appliances, although there
are problems of weighting and of “struc
tural change” as the relative importance
of different groups changes. There has
been a detailed analysis of appliance

00059.jpg

Chart 11.2
Domestic energy savings, 1970 to 1998 Source: Derived using data from BRE.

energy consumption by the Oxford DECADE group and the following analysis is based on their work.

Overall some 2 mtoe appears to have been saved as a result of improvements in appliance efficiencies since 1970 and this excludes improvements in the quality of appliances and in lighting efficiency. If these savings are added to those from heating savings then it suggests that the increase in domestic energy use of nearly mtoe, which is made up of an increase due to higher “activity ” (more households, more heating, hot water and appliance use per household) of at least 35 mtoe offset by a reduction due to higher efficiency of nearly 30 mtoe. This is illustrated by Chart 11.2.
In the case of some groups of appliance saturation levels are approaching, so that future improvements in efficiency have to depend on replacing existing models. For others marketypenetration is lower and future sales may be of more efficient models.

00060.jpg

Chart 11.3
Percentage of households owning
refrigeration appliances, 1970 to 1998 Source: DECADE

The DECADE study indicates that among non-catering domestic appliances the biggest groups are now “cold” and “wet” appliances. Ownership levels of these are shown in Charts 11.3 and 11.4 respectively. Although Chart 11.3 suggests that ownership of cold appliances is far from saturation levels what has happened is that the fridgefreezer has tended to replace individual fridges and freezers and nearly all households will have one or the other. There may be scope for more switching to fridgefreezers however. Among wet appliances, ownership of washing machines has approached saturation levels but that of dryers and dishwashers is still relatively low although the shape of the dryer penetration curve suggests some leveling off since the late 1980s.

00061.jpg

Chart 11.4
Percentage of households owning
refrigeration appliances, 1970 to 1998 Source: DECADE

SERVICE SECTOR DEMAND

This very varied sector comprises private commercial services such as shops and offices and those activities, which are largely in the public sector - central, and local Government offices, education and health. (For an indication of where service sector energy is used, see Chapter 10.)

In terms of value added output in the sector has grown by over 90 per cent since 1970. This is much faster than industry. Whereas energy consumption, on a heat supplied basis, is only about 62 per cent that industry, implying that services are much less energy -intensive than industry.

Energy consumption in the sector has grown by 1 per cent since 1970, but this hides an increase in electricity of about 133 per cent (a larger increase than in the industrial or domestic sectors), largely where consumption has more than quadrupled over the period. In terms of the primary fuel required to meet the sector’s energy needs, the rise since 1970 has been about 30 per cent, reflecting the rise in the share of electricity where most of the conversion losses are. Indeed electricity demand is about the same size as fossil fuel demand in terms of the primary fuel required.

00062.jpg

Chart 11.5
Service sector energy consumption and output, 1970 to 1998
Source: Department of Trade and Industry, Office for National Statistics.

Despite the rapid rise in electricity demand, energy intensity in the sector has fallen by some 3 per cent since 1970: Chart 11.5 illustrates this. Most of this rise is likely to be due to higher efficiency although structural change within the sector has also brought bout some reduction in energy use: since 1970 the private commercial sector, which is less energy -intensive than the public sector, has grown faster and this has reduced energy intensity.

The rise in efficiency is a combination of more efficient heating systems, insulation, greater efficiency of lighting and electrical equipment and improved energy management leading to appliances being switched off when not in use.

Although overall service sector energy intensity is conveniently measured by value added, the relative energy intensity of individual types of building in the sector can also be measured by floorspace.

Chart 11.6. compares energy consumption per square meter in different buildings and shows large variations between them. The most energy -intensive sub-sector is health, because hospitals need high levels of heating all the time and large quantities of hot water.

00063.jpg

Chart 11.6
Average energy consumption per unit floor area for service sector buildings 1997
Source: Building Research Establishment

At the other extreme warehouses require little heating and are therefore not very energy intensive. Nor is the miscellaneous category, which includes items such as car parks, which require virtually no energy apart from a little lighting. Hotels and catering, sports, entertainment, and offices all have above-average energy intensity. The chart has been prepared by BRE on the basis of a sample of about 250 buildings.

One reason for the reduction in energy intensity overall has been a reduction in floorspace per person in many offices. But to maintain comfort standards in offices with high staff densities may require air conditioning.

The rise in the importance of air conditioning is one of the main reasons for the increase in the share of electricity in the service sector, another being the growing use of electrical equipment such as IT equipment, which may tend to increase energy intensity but increases labour productivity.

Air conditioning still only accounts for about per cent of service sector energy use at present and is installed in only a small proportion of non-domestic buildings, but as it is more likely to be installed in newer buildings its importance will increase. The share of electricity is also high in the retail sector, which has a high lighting demand. Retail floor space has increased by nearly 50 per cent over the period. However, shops vary considerably in their electricity needs with certain types such as hairdressers and dry cleaners having high requirements.

TRANSPORT DEMAND

Total transport demand for energy has risen by 90 per cent since 1970, much faster than any of the other main sectors and also faster than GDP, which rose 85 per cent in the same period. Despite a rapid rise in air transport energy demand since 1970, energy use in transport is dominated by road transport, which accounts for about over three-quarters of the total. See Chapter 10 for further details on energy use in transport.

Energy intensity in the transport sector, like that of the domestic sector, cannot readily be measured in terms of value added because the transport sector as a whole includes activities (those not relating to business use) which are not part of the conventional measure of GDP.

Conceptually transport could be treated not as a sector but as part of the industry, service and domestic sectors, in which case the fuel used by vehicles for industrial or commercial use could be measured against the output of those sectors, in the same way as other industrial and commercial use of energy. But this would be only a partial solution to the problem as private motoring (which accounts for more than half of all transport energy use) could not be incorporated into this classification.

It therefore makes sense to treat transport as a sector in its own right, which is how it is treated in this and other DTI energy publications. Energy intensity can be measured in terms of the distance and load carried, i.e. as passenger km or goods km. This still presents some problems, however, as it is difficult to weight passenger and goods transport together.

Some indication of the trend in overall energy intensity in road transport can be obtained by dividing total energy used by
total road vehicle kilometers. This
shows a reduction of 1 per cent since
1970, but part of this apparent
improvement in efficiency stems from a
switch from public transport to private
cars, which increases the number of
vehicle miles but not the number of
passengers carried. From the energy
intensity point of view it would seem
more appropriate to use passenger km
and goods km and relate these to
separate estimates of passenger and
freight fuel use which have been
produced by the National
Environmental Technology Centre for
the Department of the Environment,
Transport and Regions.

00064.jpg

Chart 11.7
Energy consumption & distance traveled by road passengers, 1970 to 1998 Source: Derived from Department of Environment, Transport and the Regions

Fuel use by road passenger vehicles
increased by an estimated 81 per cent between 1970 and 1998. Over the same period, mileage by road passenger vehicles increased by more than this (129 per cent), but total passenger km by about the same amount, 83 per cent, less than vehicle mileage because of the increase in the share of private cars which of course carry fewer passengers than buses and coaches. So over this period fuel use per passenger km has remained about the same.

This does not mean that the efficiency as distinct from the intensity of road passenger transport has declined because at least part of the increase in intensity is a structural change effect resulting from the switch from buses and coaches to private cars with their higher energy intensity per passenger km traveled. Actual efficiency over the period is difficult to measure. As stated above private cars now account for over half transport fuel consumption and there has been an improvement in the efficiency of new cars

Safety and emissions standards have also had an effect on the fuel efficiency of new vehicles. For example, the catalytic converter, introduced following new emissions standards in 1993, will have increased fuel consumption for all engines sizes, all other things being equal.

The average fuel efficiency of the UK vehicle stock has also been improved by the increasing penetration of more efficient diesel-engined vehicles. In 1998 15 per cent of new car registrations were diesel-engined, compared with 6 per cent in 1990; by 1998 the diesel-engined share of the car stock was more than three times that of 1990. UK petrol consumption is now almost exclusively in cars and taxis (which accounted for 95 per cent in 1998) and light vans (about 4 per cent). DERV consumption is predominantly used for freight transport (6 per cent in 1998), but 26 per cent is now in cars and taxis and per cent in buses and coaches.

The current fuel duty strategy aims to encourage greater energy efficiency in the road transport

sector by allowing consumers and producers to choose the least cost method of reducing fuel consumption - for example by demanding more fuel-efficient vehicles or by more fuel-efficient driving behavior. But the precise link between any given fuel tax increases and general reductions in average fuel consumption will always be difficult to establish.

Fuel consumption factors show how efficiently car travel has changed over time. As mentioned before, efficiency can be affected by improvements in car design, changes in journey length and congestion. Between 1970 and 1998, fuel consumption factors have been getting closer to each other as petrol cars become more efficient and burn less fuel and the demand for high performance diesel cars grows.

ENERGY EFFICIENCY

Governments have become increasingly aware in recent years of the significant environmental impact of the production and use of energy. Actual and potential damage to the environment, particularly from gaseous and other emissions from energy production, have led to a range of agreements in various international for aimed at limiting further damage. However, the scope for reducing energy consumption is limited in a world where nations want economic growth to improve the quality of life of their peoples.

More immediately acceptable means of reducing the environmental impact of energy production are the development of alternative fuels and the improvement of the efficiency of its production, conversion, and final use.

A number of the main international energy - related agreements and initiatives are set out, designed to ensure more efficient use of energy related resources.

The amount of primary energy required to provide a unit of final consumption has not changed greatly over the last 28 years. On average, between 66 and 1 per cent of primary energy was used to provide a unit of final consumption. On the face of it, this would lead one to assume that there have been no efficiency gains in the conversion of primary energy into final energy consumption; but this is not the case. There have been improvements in conversion efficiency in power stations and oil refineries, but a switch in final demand from direct use of fossil fuels to electricity has offset these, which is still the most inefficient conversion sector. The conversion Efficiency is discussed in Chapter9.

The form of energy, which effectively determines the ratio between primary and final energy consumption, is electricity. The actual level of consumption of electricity has been increasing, as has the electricity share of final consumption; if there had been no efficiency gains this would have led to an increase in the primary energy required to produce a unit of final consumption because of the conversion losses involved in the generation of electricity. This increase in the amount of primary energy required has not occurred, owing to efficiency gains in power stations, particularly with the development of Combined Cycle Gas Turbines. Similarly, emissions of carbon dioxide from power stations have fallen, despite increased production of electricity.

Over recent years, the use of fossil fuels for the generation of electricity has declined, due almost entirely to increased nuclear generation. A small amount of electricity is also generated by hydropower. This has meant that we have been able to continue increasing the amount of electricity available for use without significantly increasing the need for fossil fuels. Within the fossil fuels used for electricity generation there has been a move over to using natural gas rather than coal. Chart 11.1 illustrates what the consumption of fossil fuels would have been if the mix of fuels used for generation had remained in the same proportions as in 1970.

The difference between this hypothetical level of fossil fuel use and the actual level used can be thought of as the saving in fossil fuel use resulting from a combination of using more non-fossil fuels (such as nuclear) as a means of generating electricity, together with efficiency improvements in the plant used to generate electricity.

A key environmental area in which energy is a major factor is climate change. Air pollution is also a major consideration. Fossil fuels are responsible for the majority of emissions of the most important greenhouse gas, carbon dioxide, and of other pollutants, such as sulfur dioxide, black smoke, and oxides of nitrogen, which affect air quality. In 1998, 92 per cent of carbon dioxide emissions were caused by fossil fuel combustion, through electricity generation and other energy use.

These emissions can be cut down through they use of more energy efficient methods.

Improving energy efficiency is an obvious and important means of assisting progress towards the achievement of environmental objectives, whilst maintaining an increasing level of economic output and personal comfort.

It can also contribute towards the increased competitiveness of UK goods and services.
Over the years, demand for electricity in the UK has gone up - averaging 2 per cent a year increase since 1985. Given this increase in requirement for electricity, and hence in fuels to generate it, one
might have expected the UK’s carbon
dioxide emissions to have increased;
but this has not happened. Chart 11.8
shows the emissions of carbon
dioxide from major power producers,
and shows that emissions of carbon
dioxide from power stations have
been declining, even though demand
for electricity has been increasing.

This is largely due to the changes in
the use of fuels for generation of
electricity, as described before. By
way of illustration, the Chart also
shows what estimated emissions of

00065.jpg

carbon dioxide would have been if our
pattern of fuel use for generation and
the technology employed had Chart 11.8
remained the same as in 1970.

Carbon Dioxide Emissions From Major Power Generators 1970-1998 Source: Derived from Department of Environment, Transport and

The effects of energy efficiency on the Regions
both the supply and demand sides are
combined in the energy ratio (the ratio of temperature corrected primary energy use to Gross Domestic Product - GDP), which has fallen fairly consistently over the last 25 years: in 1998 primary energy consumption was only 11 per cent higher than in 1970, despite an 85 per cent increase in GDP.

THE GOVERNMENT’S APPROACH
A SUSTAINABLE ENERGY POLICY

In recent years, the principal international energy issues have shifted from supply interruptions and their implications for energy security and price stability to the impact of energy production and consumption on regional and global environments. Frequently, regional and global environmental goals are in conflict. For example, nuclear or hydropower energy projects may be opposed within a given country, while on a global scale they lessen emissions of carbon dioxide—the principal greenhouse gas. Although the focus of this analysis is on global environmental issues such as climate change, it should be understood that local environmental concerns and political decisions based on them may affect theability of the world community to meet global environmental
goals. In the coming decades, global environmental issues and their policy implications could significantly affect patterns of energy use.

UK Government continues to be committed to promoting the more efficient use of energy. As part of its policy to encourage sustainable development, the Government has continued to work with all those with an interest in the field to stimulate the take up of energy efficiency and renewable energy. These protect the environment, and are expected to play a key role in the Government’s climate change programme. Energy efficiency, in particular, helps the less well off to keep warm and health, by reducing their fuel bills, as well as improving the competitiveness of industry and reducing the cost of public services.

Fundamental advances in energy efficiency are needed to tackle the long-term threat of climate change. Emissions from the transport sector will also need to be cut and the use of alternative fuels in electricity generation increased. The Government is reviewing policy on renewables, to establish the feasibility of, and measures required to deliver a target of 10 per cent of electricity demand from renewable sources by 2010.

CLIMATE CHANGE

 

The Government is determined to lead the world in the fight against climate change.

It is preparing to publish a draft national climate change programme in the near future. The programme will reflect responses to the Government’s previous consultation on the policies and measures which might be adopted to meet the UK’s legal binding Kyoto target of a 12.5 per cent reduction over the period 2008 to 2012, and to move towards the Government’s domestic aim of a 20 per cent reduction in CO2 emissions from 1990 levels by 2010. The aim will be to engage all sections of the economy and society in efforts towards reducing greenhouse gas emissions and energy efficiency will have a role to play here in many spheres.

The key task now is to consider the options for the future, and the part which energy efficiency should play in meeting the Government’s climate change targets. Energy efficiency is an attractive option because of its social, economic and environmental benefits. The costs, benefits and practicality of reducing emissions through energy efficiency are being balanced against those of other options as the programme is developed.

CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS
Depletion of resources

Developed economies such as the UK are critically dependent on the supply of energy and a prime sustainable development aim is to ensure that future generations can enjoy a quality of energy services comparable to that enjoyed today. The way in which energy is produced, supplied and consumed is one of the major ways in which human activity affects the environment. The UK has 4 main sources of primary energy: coal, oil, natural gas and nuclear, of which the first 3 are based on finite fossil fuel reserves. However, additional reserves of oil and gas continue to be identified or confirmed in the UK continental shelf.

Oil - Following the discovery and extraction of North Sea oil in the early 1970s, annual oil production rose steadily to nearly 130 million tonnes in the mid-1980s. In the late 1980s, production declined, following the Piper Alpha accident, but has recently returned to the mid-1980s levels. Although 8 per cent of the UK's proven and probable reserves were consumed in 1994, the ratio of production to reserves should not be taken as a measure of the future life of reserves. It is likely that the reserves still to be discovered or confirmed will enable the UK to sustain its current levels of production for much longer than a decade.

Natural gas - Annual natural gas production has risen steadily since 1970 to 70 billion cubic metres in 1994. Outside the transport sector, natural gas - a relatively cheap and clean fuel - has become the dominant fuel, accounting for 65 per cent of domestic fuel use, 42 per cent in the commercial and public sector, and 33 per cent in industry. Recently, its use for electricity generation has grown sharply; by the end of 1995 it accounted for more than 15 per cent of the fuel used. The depletion rate, at 4 per cent in 1994, is about half that for oil although, as with oil, this depletion rate should not be taken as an indication of how long the reserves will last. Additional gas reserves continue to be discovered and it will be possible for production to continue at current levels for longer than suggested by the current depletion rates.

Coal - The relative benefits of greater convenience and competitive pricing offered by other cleaner fuels, plus the pressures of Clean Air legislation, have effected a severe squeeze on the use of coal. The proportion of total fuel demand satisfied by coal has shrunk from over 40 per cent in the early 1970s to about 25 per cent in 1994. The depletion rate of economic coal reserves, at about 5 per cent in 1994, was similar to the rates for oil and gas. Data on this basis for earlier years are not available. Unlike oil and gas, the future prospects for coal do not depend on new discoveries, because substantial additional coal reserves are already known. However, the greater part of these resources is not considered economic at current energy prices. Any development of these resources will depend on future energy prices, and perhaps on the development of cheaper exploitation technologies.

UK oil and natural gas production has increased over the last two decades, while production of coal has declined. Consumption of the UK's own resources of oil is currently at a rate of 8 per cent of proven and probable reserves per year, while for natural gas the rate is 4 per cent, although additional reserves of oil and gas continue to be identified.

In the longer term, as existing energy resources become more scarce, energy prices can be expected to rise, encouraging greater fuel efficiency and boosting incentives to develop alternative sources.

Consumption growth

Primary energy consumption in the UK has remained fairly constant since 1970, despite the 60 per cent increase in GDP, indicating that the economy has become more fuel-efficient overall. This has been attributed in part to the increase in world oil prices in the 1970s and early 1980s. Most of the improvement has been in the manufacturing sector where final energy consumption has fallen by 40 per cent, largely as a result of structural change.

Over 30 per cent of primary energy are lost in the conversion to electricity and secondary fuels and in the distribution system.

 

Final energy consumption has been increasing since the early 1980s, due to increased demand in all sectors except industry.

Total industrial energy consumption has fallen by 44 per cent since 1970. Over the same period industrial output has risen by 49 per cent. As a result energy consumption per unit of output has fallen by 62 per cent over the period. This reflects a decline in the importance of energy intensive industries and considerable fuel switching as well as real increases in energy efficiency.

Most of the improvement has been in the manufacturing sector where final energy consumption has fallen by 40 per cent, largely as a result of structural change.

An increase in demand for electricity consumption of 133 per cent has been largely offset by falls in fossil and other secondary fuels. The increase in electricity demand is mainly due to an ever-increasing reliance on electrical equipment (information technology, medical and leisure equipment) and the growing use of air conditioning.

Energy consumption in the commercial sector - the fastest growing sector in the economy - has risen by 15 per cent, although some energy efficiency gains have also been made here.

Final energy consumption by households has risen by 28 per cent since 1970, mainly because of the increase in the number of households.

Transport demand has risen rapidly, by 90 per cent since 1970, mainly due to the increased use of cars, and now accounts for a quarter of total final energy consumption. Despite a rapid rise in air transport energy demand since 1970, energy use in transport continues to be dominated by road transport, which accounts for over three quarters of transport demand.

Fuel consumption is rising fastest in the road transport sector, and there has been no improvement in fuel efficiency over the last twenty years in terms of fuel used for passenger and freight transport, despite increases in the fuel efficiency of individual vehicles.

Domestic fuel prices increased by 11 per cent in real terms since 1970, mainly as a result of VAT at 8 per cent in April 1994, while real per capita incomes have increased by 65 per cent. Transport fuel prices have increased by only 2 per cent, although in recent years price rises have been larger as road fuel duties have been increased in real terms by 5 per cent a year. Industrial fuel prices in real terms are 10 per cent lower than they were twenty years ago; price reductions have been particularly marked in recent years as added competition between energy suppliers has exerted downward pressure on prices.

It’s obvious that energy consumption grows rapidly.

Like it or not, whenever we use energy from fossil fuels, we are dumping carbon dioxide into the atmosphere. From the beginning of the Industrial Revolution, the rate at which we burn fossil fuels has increased every year. The rise of the automobile and the easy availability of cheap petrochemicals in the 1950s and 1960s have made this increase exponential. Now, fossil fuels are used on such a vast scale that the planet is failing to cope. The build-up of carbon dioxide in the atmosphere is now recognised as a major cause of the instability in the global climate, placing vast areas of the world at risk.

The world population has doubled since 1950. By the year 2030, more than 10 billion people will inhabit the earth. There is now little doubt that we can no longer enjoy our present consumption patterns without putting at risk the future of life on earth. In the developed West, we currently enjoy the benefits of a disproportionately large share of the world's energy; yet the whole planet carries the burden of our emissions. As the global demand for electricity rises - particularly in China and the rapidly developing eastern economies - there is little doubt that this vast increase in emissions will have dramatic consequences for the global Eco-system. The world cannot support our socio-economic activities. The time is ripe for consideration of alternative models of development.

Future development

The Government’s broad overarching energy policy remains “to ensure secure, diverse, and sustainable supplies of energy at competitive prices ”. The key policy questions for the future center on the interplay of the four different facets of that policy -security, diversity, sustainability, and competitive price -which may not always be pulling in the same direction.

The Government’s presumption is that these requirements can best be met, or balanced, within the context of open and competitive markets, since these will ensure appropriate allocation of resources, promote efficiency of operation, and offer scope for innovation in the way energy is produced, supplied, and used, and in the ways consumers are serviced.

Of course, we must not consider where out energy supplies are going to come from in the future without reminding ourselves that the first, and in some ways most important thing to consider and work on is getting our demand down; finding ways of using a lot less energy to start with.

We already know that we could cut our demand for energy by half and still have as good a standard of life. Therefore, reasonable energy consumption is the key to our solution.

Promoting energy efficiency is therefore a key element of the UK's approach for tackling climate change. It also saves money (significant improvements in energy efficiency can usually be achieved for low capital outlay and with a short payback period - so that it is readily possible to save significant amounts of money), creates jobs, improves old and vulnerable people's housing, and makes industry more competitive.

Carbon intensity is a measure of the amount of carbon used per unit of energy produced. Because energy produced from nuclear power plants and from most renewable facilities (wind, solar, and hydropower) emit no carbon and the carbon content of fossil fuels varies, fuel choice makes a significant difference in terms of the amount of carbon dioxide emitted in meeting energy demand.

A more formal perspective on the components of carbon emissions levels is provided by the following simple equation, where total energy-related carbon (C) is equal to the ratio of carbon to energy (C/E) times the ratio of energy to gross domestic product (E/GDP) times GDP:
C = (C / E) X (E / GDP) X GDP2.

Clearly, government policy is not formed with the intention of reducing a country’s GDP. The primary goal of carbon reduction policy, therefore, is one of constraining carbon emissions while minimizing adverse affects on GDP growth.

What changes have taken place have been the result of changes in technology, such as the introduction of nuclear power, or market forces, such as the emergence of natural gas as a competitive fuel for electricity generation.

Increasing the use of low-carbon or carbon-free energy sources may require costly long-term changes to the energy infrastructure, but there is little chance of stabilizing carbon emissions without them.

By their nature fossil fuels will inevitably run out. New and renewable energies will therefore become one of the world’s main energy sources in the new millennium. Developing a thriving renewables industry in the UK therefore represents a real opportunity for UK policy. It provides a three term “win-win-win” equation: encouraging the development of new technologies; creating new jobs; and tackling global environmental challenges.

Renewable sources of energy make an important contribution to secure, sustainable and diverse energy supplies and are an essential element of a cost-effective climate change programme.

The Government is working towards a target of renewable energy providing 10 per cent of UK electricity supplies as soon as possible. It hopes to achieve this by 2010. Whilst this is an ambitious target it is not an end in itself.

Increasing use of alternative energy resources, develop of new technologies and innovations for more effective energy use are key factors, which will ensure a strong, world-beating industry develop in the UK.

Renewables are not only important in generating jobs and developing future industries, they will also play a crucial role in enabling the UK to meet our environmental targets of reducing greenhouse gases by 12.5 per cent by 2008–2012 and our goal of reducing emissions of carbon dioxide by 20 per cent by 2010. As Prime Minister Tony Blair has emphasised, this Government is committed to putting the environment at the heart of our decision making.

We must be committed to encouraging sustainable development; to developing policies and encouraging behaviour, which combines economic, social and environmental objectives to ensure a better quality of life for everyone. We must find new patterns of production and consumption that are globally sustainable. Sustainability should not be seen as a barrier or burden to business. Rather it is economic common sense. The drive to sustainability will stimulate invention and innovation and will bring new opportunities for business and growth, both here and in export markets overseas. Nowhere is this more apparent than in the renewables industry.

2 R. Jones and B. Tierney, “Carbon Emissions—A Kaya Identity Perspective on Historic Emissions and Proposed Emission Reduction Targets and Timeta-bles,”in International Energy Markets: Competition and Policy, Conference Proceedings of the 18th Annual Conference of the IAEE (San Francisco, CA, September 7-10, 1997).

The Government has a Manifesto commitment to “a new and strong drive to develop renewable sources of energy”. It has undertaken a review of the status and prospects of renewables, including an examination of what would be necessary and practicable to achieve 10 per cent of UK electricity requirements from renewables by 2010 and what contribution renewables could make to reducing greenhouse gas emissions.

The Government intends to work towards the aim of achieving 10 per cent of the UK’s electricity supply from renewables. Renewables are an essential component of any cost-effective climate change strategy. Achieving the 10 per cent target could lead to a reduction of 5 million tonnes in UK carbon emissions, making a valuable contribution to our overall climate change strategy.

The Government intends to remove institutional and market barriers to the development of renewable electricity. In particular, in its plans for the separation of the supply and distribution activities in the electricity sector, it will be looking closely at arrangements to ensure that so-called “embedded” generators (i.e. those directly connected to local distribution systems – as is often the case with renewables producers) receive a fair price for their electricity. This will minimise the cost of supporting renewables. It will also be looking at planning arrangements, opportunities for developing energy crops, and other issues which might help the development of renewables.

Producing 10 per cent of the UK’s electricity from renewables appears to be a feasible target. There will however be some additional cost as compared with the cheapest sources of generation available. The level of those costs will depend on the nature of any support measures, particularly the extent to which they support longer term as well as near market technologies, and the success of the other measures mentioned above. The aim of any programme would, however, be to continue to put downward pressure on the cost of renewables, so as to meet our objectives in a cost-effective manner.

It will be possible to achieve this target by around the year 2010, but it will it is necessary to gauge the precise level of support needed in the context of its overall climate change programme and the other measures introduced in that context, as well as the rapid market changes currently under way. What is clear is that renewables will be an essential part of our overall response to the climate change challenge, particularly in looking forward to the longer term, post 2010.

Government is confident that it has set the stage for its new drive to develop renewables. It has committed itself to devoting increased resources to their development. Along with the market reforms it is introducing, and the success of earlier programmes in bringing down costs it believes that many conditions have been satisfied for an increasing contribution from renewables over time, but also for an increasingly successful and commercial renewables industry. These are both essential elements of the Government’s approach, and of a cost-effective climate change programme. The Government will continue to work towards these objectives, and will be prepared to consider what further forms of support might be necessary in order to achieve its aim cost-effectively.

The UK now has one of the most open, fair and competitive energy markets in the world. Any support for renewables therefore needs to work both with the Government’s Competitiveness White Paper and with the grain of competitive markets, including consistency with the Government’s wider climate change programme, on which a consultation document was published in October 1998.

Why support renewables?

1. The Government’s central energy policy objective is to ensure secure, diverse and sustainable supplies of energy at competitive prices. Renewable energies, produced from sustainable natural sources, clearly contribute to the sustainability element of this objective. Although they currently form only a relatively small part of the UK’s electricity generation, as mentioned above, their use is expanding and they have a contribution to make to the future diversity of our energy mix. Since most of the sources are indigenous and naturally available, they also have a potential contribution in terms of security – supplies will not be disrupted by international crises or run out over time. However, since they depend in most cases on natural processes, this security is not always the same as with fossil fuels. For instance, some sources such as wind power are intermittent, while other sources such as hydro may vary in their potential according to the weather – a dry year often means reduced supplies of hydro-based electricity in countries heavily dependent on this source.

2. Renewable sources of energy produce significantly lower levels of environmental pollutants than conventional sources of energy; in particular, they generally emit no greenhouse gases or are neutral over their life-cycle in greenhouse gas terms (for instance, energy crops produce carbon dioxide when they are burnt, but the new crop growth absorbs an equivalent amount of carbon dioxide from the atmosphere, making the process as a whole neutral in carbon terms). Waste for which there is no more economic use such as recycling can also often be used as a fuel and achieve savings in fossil fuel use and reductions in CO2 emissions. New energy sources include technologies such as fuel cells, which convert the energy of a chemical reaction, typically between hydrogen and oxygen (generally from air) directly into low voltage direct current electricity and heat.
3. The sustainability of renewables means that they will continue to be available even in the longer term future, when fossil fuel sources may be getting scarcer. But adapting to using renewable technologies on an increasing scale may require significant changes in our institutions and attitudes. Most of the technologies are small-scale, modular, and deployed close to the resource itself. If they become a major part of our energy supplies this will have implications for its overall structure – probably involving large numbers of individual power sources, rather than the present limited number of large central installations.

4. Another significant difference is that renewable energy technologies tend to have relatively high capital costs. Fossil fuels represent a very concentrated form of energy. Renewables, by contrast, normally use dispersed sources with low energy concentrations, such as wind. On the other hand, they tend to have low operating costs, because the fuel is normally free or low cost.

5. A further key feature of renewables is that since they depend generally on the natural environment, the range of sources available internationally will vary significantly from country to country. For instance, the UK is relatively well placed as regards wind power potential by comparison with other countries, but its geography is not in general very favourable to more hydro-power. Similarly, different regions of the UK offer different potential renewables contributions.

6. It is also important to stress that although it is convenient to talk about ‘renewables’ as a single category, many different technologies and fuels are involved, all with very different characteristics. Some, such as wave energy are still at the research. Others, such as energy crops, are at the technical demonstration stage.

7. Technologies such as wind are beginning to be deployed on a significant scale but generally in markets where there is some financial assistance. Hydro-electricity is well established. Other technologies currently have applications only in niche markets, for example photovoltaics, but with further development to reduce their costs, they could be deployed competitively on a large scale.

8. In general, many technologies can be regarded as immature in terms of their market development and few are yet both fully competitive and technologically proven. Furthermore, individual renewable sources or technologies have inherent limits, because they depend largely on a fixed natural resource. One important implication is that if renewables are to expand their contribution to the UK’s energy mix significantly, this will require not just the expansion of existing sources and technologies, but also the development and deployment of new technologies.

9. New and renewable energy technologies can be applied in the heat, electricity and transport markets, for example wood-burning stoves and solar water heating panels to produce heat, wind turbines to produce electricity, and fuel cells to power motor vehicles. But in UK conditions, the main emphasis historically has been on electricity generation because many of the technologies are best applied to produce electricity and that is the earliest market likely to be economic on a major scale.

10. As far as diversity is concerned, significant amounts of renewable generation are likely to be competitive against new coal or nuclear plant in the next decade or two, provided the momentum of development is maintained.

12. Modern society remains dependent on the availability of energy in sufficient quantities to meet its needs, and the above issues, together with security of supply issues in the longer term, highlight the need to secure an increasing contribution to energy supplies from renewables, as well as pursuing the other measures.

Looking at these arguments in more detail, there are a number of distinct energy policy reasons for supporting the development of renewables:

 

their potential contribution to diversity and security in energy supply;

recognition of the environmental benefits of renewables, and in particular the contribution they can make to meeting current and longer term climate change targets for the reduction in emissions of greenhouse gases;

long term economic viability. Support provided now may help address economic and other barriers which need to be overcome to enable renewables to gain a firm foothold in the market, after which they should be increasingly competitive with a declining need for support. This suggests that any support may need to be selective in the technologies for which it is used.

In the context of industrial policy there could also be additional gains, including assisting the renewables sector of UK industry become competitive, exporting goods and services and providing new employment.

Overall, there is a strong case for support for renewables as:

 

• an option for maintaining a degree of diversity in the electricity system in the longer term;

• the most promising option for the development of a sustainable non-fossil electricity generation system. Although fossil fuels are not currently in short supply, the world can clearly not sustain rising fossil fuel demand indefinitely and renewables will be required on a growing scale in the coming decades;

• an increasingly cost-effective means of reducing CO2 emissions, if development is supported and maintained.

 

RECOMMENDATIONS
I think that in short term the main objectives could be summarized as follows:

1. It’s obvious that energy consumption grows rapidly. The key sustainable development objectives which are to ensure supplies of energy at competitive prices, to reduce adverse impacts of energy use to acceptable levels, and to encourage consumers to meet their needs with less energy input can find solution through improved energy efficiency and energy intensity of UK.

2. Action will need to be taken at every stage of the energy cycle — production, distribution and final use — to improve efficiency and reduce costs. The aim of this key action is to provide UK with a reliable, efficient, safe and economic energy supply for the benefit of its citizens, the functioning of society and the competitiveness of its industry.

Work must focus by way of priority on:

 

• technologies for the rational and efficient end-use of energy,

 

• technologies for the transmission and distribution of energy,

 

• technologies for the storage of energy on both the macro and the micro scales,

 

• improved exploration, extraction and production efficiency for hydrocarbons,

 

• improving the efficiency of new and renewable energy sources,

• the elaboration of scenarios on supply and demand in economy/environment/energy systems and their interactions, and the analysis of the cost-effectiveness (based on whole-life costs) and efficiency of all energy sources.

3. We must find new patterns of production and consumption that are globally sustainable. Sustainability should not be seen as a barrier or burden to business. Rather it is economic common sense. The drive to sustainability will stimulate invention and innovation and will bring new opportunities for business and growth, both here and in export markets overseas. Nowhere is this more apparent than in the renewables industry.

4. The Government intends to work towards the aim of achieving 10 per cent of the UK’s electricity supply from renewables. Renewables are an essential component of any cost-effective climate change strategy. Achieving the 10 per cent target could lead to a reduction of 5 million tones in UK carbon emissions, making a valuable contribution to our overall climate change strategy.

5. In addition, the Government should press ahead with reforms which will both improve the operation of energy markets and enable all alternative energy issues to compete more effectively.

6. We must perform fuel-switching in power generation between fossil fuels – this has already produced very significant CO2 savings, though there are inevitably limits to how far this can be taken, without jeopardizing other objectives (such as diversity);

7. We should use combined heat and power – this produces significant CO2 savings, and is a major plank in the Government’s approach, the ultimate potential will in part depend on the availability of suitable opportunities with the right balance of energy demand;

In long term I think that:

1.The key role of renewables will be in the longer term; over time, we will have to reduce our dependence on fossil fuels and turn increasingly to energy efficiency and non-fossil sources. Although the Government hopes that it will be able to achieve its 10 per cent target by around 2010, its key priority must be therefore to ensure that momentum is maintained so that even after 2010 the share of renewables can continue to rise in response to the need to limit greenhouse gas emissions to a sustainable level. This will require a level playing field for renewables in competitive energy markets.

2. Fossil fuel sources are a major contributor to greenhouse gas emissions. Reducing our use of fossil fuels, and replacing them with non-fossil sources, will be a key part of our long-term strategy to reduce greenhouse gas emissions.

3. Strategy concept of energy use must be focused on the opportunity of reducing our demand for energy by half, and having as well a good standard of life. Therefore, reasonable energy consumption is the key to our solution. As the Kenyan proverb says, “The earth was not given to us by our parents, it was loaned to us by our children”. We all have a responsibility to ensure that the way we live today does not adversely affect the inheritance we leave for generations to come.

REFERENCES

1. Office for National Statistics

 

2. International Energy Agency

 

3. Solar Trade Association

 

4. British Wind Energy Association

 

5. DTI, Energy Trends , 2007

 

6. DTI, The 2009 Energy Report, 8 December 2009

 

7. DTI, UK Energy Sector Indicators

 

8. DTI, Development of Oil and Gas Resources of the United Kingdom, May , 2007 edition

 

9. DTI , Energy Consumption in the United Kingdom, Energy Paper 66

 

10. DTI, UK Energy in Brief, Summary report , December 2003

 

11. DTI, Digest of UK Energy Statistics, 29 July 2004

 

12. New & Renewable Energy Prospects for the 21st Century , John Battle Minister for Energy and Industry

 

13. A Review of the Effects of Underwater Seismic Sound Generated by Seismic Surveys on Cetaceans; UKOOA Technical Report.

 

14. Decommissioning Options of Oil and Gas Installations in the UK North Sea - An Assessment of Environmental Impacts; UK00A/AURIS Technical Report.

15. R. Jones and B. Tierney, “Carbon Emissions—A Kaya Identity Perspective on Historic Emissions and Proposed Emission Reduction Targets and Timetables,”in International Energy Markets: Competition and Policy, Conference Proceedings of the 18th Annual Con-ference of the IAEE (San Francisco, CA, September 7-10, 1997).